As we wrap up the third month of the year and the end of the first quarter of the calendar, it is a nice time also to wrap up the 5th “P” – Profit in our 5 “P’s” review. You might say we kept the best for last, but in actuality, profit is the result when the other “P’s” are implemented and executed consistently. Once you define your Purpose and live by it, your People align and contribute at higher levels. You set the Pace of growth for your organization and keep the Perception in the marketplace free of confusion by sticking to your company’s defined vocabulary. When these are all alive and working well in the business, then “Profit” happens.
As we discuss profit, it is important to put in place the right mechanisms to understand your profit and the other various financial elements of your business. First, it is suggested you engage a strong external financial resource such as an accountant or CPA while remaining attentive to the financials directly in your business. Yes, you can have a member of your team doing the bookkeeping, etc, but as the leader, it is one of your key responsibilities and accountability to be fully aware of your financial picture. Being aware is not looking at your bank account and seeing if there is money in it to spend. Being aware is understanding the implications of cash in, through and out of your business over cycles of time.
To assist in this effort, JKL Associates embraced the Mike Michalowicz “Profit First” method of financial management. If you are unfamiliar with this approach, then get his book “Profit First,” and you are on your way to better financial outcomes. If you want an overview, feel free to call us, and we can outline our use of the system. If you want more in-depth handholding to implement, Mike and his team have certified professionals who can give you guidance.
Although the approach sets up a means to allocate revenues (sales) into various buckets so you have a fuller understanding of the impact of dollars in vs. buckets of expenses out, the biggest aspect of the system is that it causes you to rethink the best ways to run your business. This is really where the magic happens. Once you can view the cash movement in and through your business, you are incentivized to begin reviewing every way to make the business operate better. As you separate profit from sales/revenue and regularly challenge yourself to increase the allocation percentage, you need to find improvements in your business to allow more dollars to funnel into the various allocations.
The tweaks come by following your Purpose and gaining insights from your People on improvements you might not have considered. This elevates the pace of growth and focuses on allowing creativity and innovation, which are the buds of perception, to blossom naturally within your business. Leveraging your investment in Purpose, People, Pace, and Perception drives your Profit up. It may take some cycles of time to get it flowing, but in the end, the results are really worth the investment.
The Profit First approach has been suggested and implemented by many of our clients, and they are realizing its benefits. A couple of clients were astounded at the clarity it brought to the financial picture, giving them a pathway to continuous improvement. It was no longer a wish. It became an obsession to see just how well they could run their business more effectively to realize a better result. Many times more than they had ever thought possible.
Interested in a conversation about the Profit First approach? Call a JKL Associates Promise Guide at FL (407) 984-7246 or MI (313) 527-7945. JKL Associates is not a certified Profit First Professional but uses and promotes the value of the approach.
Journey On!
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Celebrating 30 years of Delivering on “Promises”
