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Show Notes

In this episode we’re looking at the exact action you need to take to get started with Profit First in your own business and we talk through the 5 bank accounts you need and give a detailed understanding of the purpose of each one and why this is such a simple yet transformational way to manage cash flow in your business.

We touch on:

    • The 5 bank accounts you need to get started with Profit First
    • Why we use bank accounts instead of a spreadsheet
    • How the entire view of cashflows in your business can be simplified into just 5 categories
    • The biggest challenge for me with cashflow before I implemented Profit First in my business
    • How this process eliminates stress, saves time and empowers you in your business

And so much more!

You ready to Prosper and Profit? Then hit play and let’s dive in.

This episode is a foundational episode on the Profit First methodology which I introduced in episode 002. If you haven’t listened to that yet I highly recommend hitting pause, tuning in to that episode first and then coming back to this one. It will make SO much more sense!

Resources mentioned in this episode

Episode 002 of the podcast: What is Profit First. Listen here https://laurajohagan.com/2024/04/08/002-what-is-profit-first/

Assess your business using the Profit Assessment, download it here https://laurajohagan.com/benchmarks/

Why so many accounts YouTube video, watch it here 

Looking for help to transform your business into the thriving, profitable business you know it could be? Book a Discovery Call with Laura here www.laurajohagan.com/book-call

Looking for help to transform your business into the thriving, profitable business you know it could be? Book a Discovery Call with Laura here

Connect with Laura
Website: www.laurajohagan.com
Email: hello@laurajohagan.com
Instagram: @laurajohagan

 

Episode Transcript

Hello, and welcome back to prosper and profit for another episode. I am thrilled to have you back here and be back in your ears and I’m going to be honest, I’m feeling a touch nervous as this podcast is starting to make its way out into the world. There’s something interesting about being new at something like this. And yeah, I’ve had all the feels of sharing my thoughts and my voice and all of the things which, is so normal when we do something new like this. But I thought it might be interesting to just share that with you. If you’re starting something new, if you’re thinking about launching something out into the world. It’s easy to look at other people and think, oh, it looks so natural, it looks so easy for them. And often behind the scenes, right? There’s fears. There’s worries. There’s nerves. There’s all of the things. And I’m sitting here right in the same seat, as you feeling all of those things as this podcast gets ready to launch out into the world. 

With all that being said, let’s dive into today’s topic, which is all about the five accounts you need to get started with profit first in your business. Now, this is a really foundational episode. So you may be listening to this sometime in the future where I’ve referenced kind of coming back to these foundational episodes. You might be listening to this right when it’s gone out live. And what we’re doing in this episode is really building on episode two. I think it was where I introduced what is profit first and I talked to you about what it is, you know, at a high level, why it’s important, how it works, what it helps you do in your business. What we’re doing now is taking it a step further and looking at what do you actually need to get started with implementing it in your business?

Now profit first was so game changing for me in my business, mostly because of tax. Tax was the bug bear for me personally, in my business. I wasn’t setting enough tax aside, I was pretty much using the bulk of what was coming into my business for the paying myself and paying my running expenses and tax was a stress point for me, not the quarterly GST, but the annual and then the quarterly instalments that I now have to pay for tax. That was a stress point for me and profit first really was game changing for me in that. I’ve seen with many of my clients who potentially tax isn’t the thing, but it’s paying themselves or it’s actually being profitable or, one of my clients, for example, needs to make lumpy payments for goods and stock that she retails in her business. You know, for other clients it’s things like their staffing costs, all of these things. The idea is that this is going to start to alleviate those cashflow stress points for you in your business. So, what we’re going to do today is dive into that and look at that. So that you can start looking at implementing this in your business.

So let’s start at a little bit of a higher level, which is. Why do we have these five accounts? 

The way I like to think about it is that our entire business can pretty much be looked through the lens, I have these five categories, right. Let’s run through them so that you understand what I’m talking about. There’s a category of profit, right? And we’ve spoken about what that is in a previous episode, that’s the financial reward to you as the owner of the business for taking on the risk of being in business. But that’s basically a category of money in your business is profit.

Another category is income. So that’s all of the money that comes into your business. That’s income.

Then we’ve got owner’s compensation. I sometimes refer to this as owner’s comp. I sometimes refer to it as own as pay. I tend to use those two words interchangeably. Apologies if that is ever confusing, I should just be consistent with it, but my brain kind of uses the two. So we’ve got owner’s compensation. That is a category of paying the owners. I’m saying owners because sometimes there are multiple owners. I’ve had clients recently who are a couple and so there are two owners. I had another person that I spoke to about working together, who was in partnership with a co-owner. Then of course there are a bunch of my clients, the vast majority are single owners of the business. So owner’s comp is the category of paying yourself for the work you do in your business. And what’s really interesting here is noting that we’ve got owner’s compensation separate from profit. So we view those as two distinct and separate things. In this view of viewing the business.

The next category we’ve got is tax. Right? I think we all know what tax is. That is a liability that our business has to pay our tax office. Now I have clients in different jurisdictions. So in different countries, across the world, there are different tax departments. There’s the IRS, there’s the ATO in Australia. I have clients in Europe, so they’re just different tax offices that people need to make their tax payments to. But the idea of tax, unless you live in a tax haven, which, amazing, I would love to get the benefits of that. Unless you live in a tax haven, it’s pretty consistent in most of the Western countries around the world. That tax is a thing, and we all understand what that is.

Then the last category that we’re looking at. Is operational expenditure. So that is the remaining costs that are involved to run your business.

So let’s recap, there are five key categories that can summarise the entire cashflow of your business. So what happens with all of the money that comes through your business? It can literally be categorized into one of these five categories, which is profit. Income. Owner’s compensation. Tax. And operational expenditure. If we look at those five categories, we have pretty much summarised every single dollar, every cent, every Euro, every pound that comes through your business. And I’m just touching on the key areas my clients come from are across dollars, pounds and euros, but I know there is a bunch of other currencies and you may operate in a different currency, so just insert your currency of choice there. But if we look at these five categories, it is exactly a summary of what happens to every bit of money that comes through your business? It, it fits into one of these five categories. 

It’s really quite mindblowing to think about. That I can summarise the cash flows of my business into just five categories. Like, that’s pretty simple. And that’s what I love about this so much. I love that it just makes cashflow management so simple. 

So starting from there, right? We’ve got this idea of all of the cash flows, all of the money that moves through our business, sits in one of these five categories, right. And when we spoke about profit first and I introduced that in episode two, which may very well be relevant to go back and listen to, if you haven’t listened to it yet. We spoke about profit first and one of the ways to look at it is a cash flow management system. What it does is, it’s this idea of setting money aside into each of these key categories, so that we have the money set aside for each of these purposes. Income is obviously all of the money that comes into our business, right. And the other four categories are what happens to that money once it’s in our business. 

So we’ve got income. It’s this big bucket of money that comes in for the services that we provide. Whether you’re a bricks and mortar business, whether you’re an online business, right? Income is the same for every business. We sell products or services. Most of my clients are in service-based businesses, but they do sometimes have retail components or digital products. So we sell our retail, digital products, services and all of the money that comes to us as a result of that, of what we sell is classified as income. Then there are four ways that that can move through our business. It either moves through as profit. Owner’s compensation. Tax or operational expenditure. So when we think about this cashflow management system, you might start to see where by going here, because we’re talking about.

The idea of profit first is that we actually have a bank account. That represents each of these categories. So we open a bank account that’s dedicated just for income. That’s the bank account that we put on our invoices, that we connect our PayPal up to, that we connect our Stripe up to that. We connect our Kartra, your square payments in studio, in the salon. Right. Basically what we want to do is set up all our payment, collecting technology, whatever it is, even the invoices that you may issue from Xero, if you have a BSB and account number on there, you want it to be this income account. So we’ve got all of the money flowing into our business into one account. Even that can start to be a game changer for people because I’ve spoken to people who have, maybe some income coming into this historical account and some income coming into the one. Let’s funnel all of the income into one account. So for you, there might be a little bit of cleanup work to do. It might be changing the account that your PayPal’s linked to, it might be updating the invoices that you send out to clients but trapping all of the income that comes into your business into one account. Makes your cashflow process so simple. So, what we’ve touched on there is income being one of these five key accounts for managing the entire cashflow of your business. Then having everything that comes into your business channeled to that. 

The second account. Which is super important and is one that most people don’t have set up. 

I might just take a step back here and say, when I speak to my clients and speak to people out there who are running businesses, a lot of people are running their business off one bank account. The second majority are running it off two. So what I’ve seen is sometimes it’s just one account. A lot of the time there is two accounts and this was how I was running my business before I came across profit first. I had just like the every day account and I did have a tax account. So I was setting aside my GST, which again, I know I have clients, I have listeners who potentially aren’t in Australia, GST is like a VAT, almost like a sales tax I think. It’s a tax that we collect on behalf of the government when we make sales. So that may or may not apply for you. In Australia you register for GST when you hit a certain turnover level. I have clients in European countries that do have VAT. So I had a tax account set up for my GST, but I basically ran everything through the other account and then just try to set aside the GST when those invoices came in that had GST on them.

That’s how I see a lot of people running their businesses off those two accounts. It does get quite messy, because out of that account, the money that comes in, it’s got a whole bunch of purposes that may not necessarily match the timing of when the income comes through. It can make it really hard to get a true position of where you’re at at any point in time, because you’ve got money coming in. Like you might have money coming in and being deposited from your square or from your Stripe or from client invoices, like every day. Right. So it looks like there’s lots of money, but then we’ve got to make a tax payment and we’ve got to do this and we’ve got to do payroll and we never really get a true position of where our business is at.

So just for context, perhaps that’s where you are now. Most likely that’s where you are now. You probably are running your business off one or two accounts. The premise and the idea that we’re speaking to here is that there’s five accounts go be opened in your business to implement profit first.

So the second one that we were touching on is the profit account. The idea of course here is that we’re setting profit aside intentionally and purposefully, first, before the running costs of our business. Now you can do the profit assessment and I’ll link that up in the show notes, as I’ve got a free resource for you to do that on my website, which will show you how much profit you’re currently making in your business and then that will be your starting point for the profit that you set aside into that account. If you haven’t been making any profit I suggest starting with just 1% into profit and we dial that up over time. We’re not going to talk too much today about how much to set aside into these accounts. Like I said, there is that free resource go and do those calculations. A few people when I went on a podcast recently DM’d me and shared with me their workings and had a conversation about the realisations they had from that. So I know that can be really powerful. So perhaps go and do that to get you started.

But today we’re really talking about the bank accounts. That just reminds me if you do do that assessment and work out your percentages, come and share that with me on Instagram at @laurajohagan, I even helped someone answered a couple of questions that they weren’t sure about. So my job is really to help you get started with this, because I want to see more of you succeeding financially and getting the financial reward. And this is a system that really lets you do that. But anyway, I’ve digressed. Bringing us back.

So the second account that we’re looking at is the profit account. So we can understand the purpose of that account. Right? The idea is we setting aside profit ahead of time. For a lot of people, the profit that they want to be getting to setting aside is around five to 10%, depending on the size of the business. Like I said, that instant assessment shows you, but you can just start with the 1%, if you haven’t been making any profit before. All right.

So the next account tat we want to set up in our business and obviously go out and open all, you know, you might have one or two already, so go out and open them all together at the same time to take you up to five, potentially six, if you’re registered for GST, it can be nice to set aside your GST separate from your income tax. Again, I don’t want to over-complicate it today, but go and open those accounts and then, you can use today’s podcast to help you determine what to do with each of them.

So our third account that we’re looking at is our owner’s comp account. And this is a fun one. Especially for my service-based business owners. Owner’s comp is where we pay ourselves from. This can be a real bug bear for my service-based business owners in that when things get tight owner’s compensation or paying themselves from their business is one of the first things to go. So we’re opening a dedicated account where we are going to pre send money to that account, to pay ourselves our weekly wage or salary, depending on how you think about it. For myself I do think of it as a salary, but it’s your wage, it’s your salary, it’s where you pay yourself for the work you do in your business, whether that’s seeing your clients in the salon, seeing your clients in your clinic, seeing your clients in your coaching business, your legal services, whatever it is that you do, you are doing work in your business and you need to be compensated for the work that you do.

Now a client asked me a couple of weeks ago, what’s the difference between this profit and owners pay? Aren’t they really the same thing? And such a great question. I really like to think about them very differently and this is how I explained it to them. Let’s use a big business as an example. I’m going to use Microsoft because that is global and I was talking about Microsoft with someone who worked there a few weeks ago. Now, if I was to work at Microsoft. I would get paid a salary for the work that I do. If I go in and I’m, I don’t know, an AI developer, I go in and, you know, we all know how it works! You get paid for the job that you do. You’re an employee of that business. You provide certain services to that business. You are paid for that. Now I could be an employee at Microsoft and also invest in the business, buy shares in the business and when I do that, I become an owner of that business. A very fractional owner, if I, I don’t know, buy 200 shares, you know, it’s quite a lot of money, but I’d be a very fractional owner of that company. But nevertheless, I own shares. I am a part owner. They’re called stocks in different parts of the world. I am a part owner then of Microsoft. Now I can be both at the same time, I can be providing a service and doing my day job in Microsoft, developing AI. While I am a shareholder and part owner and an investor into that business. So every two weeks or monthly or weekly, whatever, whenever it is that my salary gets paid to me for the work I do, I get that pay. And then every quarter, Microsoft, and this is all big companies that we can invest in, you know, Woolworth’s, Telstra, Microsoft, Apple, right.

There’s companies all around the world that we can invest in and become an owner. I can be an owner of Apple and not work there. Or I could work at Apple and not be an owner, it’s the same in our business. So, when Microsoft then releases their quarterly results, they announce to the share market, the stock market, the markets, Hey, this quarter we did X and what we’re going to do is we’re going to return a little bit of profit back to each of the shareholders as their reward for investing in their business. And these are called dividends, right? It’s a profit payout to the owners of the business for the benefit of being an investor in the business. That is very different to the work I do in my business. And I’m using this big scale example because I think it helps us illustrate.

It’s exactly the same in a small business, we’re providing a service and as our business scales, right, we might be doing less and less of the work in our business. When, we are up to about the 200, 250 $300,000 turnover, mark, we’re usually the primary employee, the primary service provider in that business. And so what we want to make sure is that we’re compensated for that work that we’re doing, because that is how we earn our living. That might be coloring your client’s hair, providing your marketing agency services, providing your legal services, running your physio, your allied health practice. All of these areas that I help my clients in my clients fit across health, beauty and professional services and they fit in bricks and mortar and online businesses. So there’s a vast array of ways you may provide that service to your clients. But ultimately you’re providing a service and that is like your employment in the business. You need to be paid for that work that you do, separate to getting your dividend for being the investor in your business. So that is how I explained to that, to that client. And that was really clear and helpful for them. That helped them really say, aha. Okay. I need to be paid my salary, my wage, my weekly, you know, way of earning my living. From my business for the work I do in it. And separately, I get this financial reward, the profit distribution, that comes at a different point in time for taking on the risk of being a business owner. So I hope that distinction is helpful for you. I would love to hear your feedback on that.

Theoretically. Yes. They going back to the owner of the business. So theoretically we could say they’re the same, but it’s a mindset shift in terms of how we think about it. And I think it’s really important to think about it differently because you wouldn’t show up to your day job at Microsoft and work for three months without being paid. I want you to think about your business the same way. You may be in a growth stage. You may be in a startup stage. It’s still important to pay yourself, even if it’s a side business that you’re building alongside a day job, it’s still important to pay yourself some amount for the work that you do in your business and not get caught in the trap of reinvesting everything back in the idea of growing now and potentially paying yourself later.

We need to be paying ourselves for the work that we do now. Otherwise the business just truly isn’t sustainable. Especially if you are in your business, full-time right. I just, I personally cannot reinvest every single dollar that comes into my business back into the business, because then I don’t have a living wage. How do I pay for my groceries and pay for my kids after school care and pay for my mortgage, all of those things, right? So the same for you. I’m guessing you want to pay yourself and pay yourself healthfully and we’re going to talk about money, mindset in a future episode.

I hope all of this context really helps you see why there’s so much intention and purpose around having these separate accounts. It’s all going to come together when we see this complete picture. So that was our third account. Owner’s compensation account. That is where we pay ourselves and it might not be weekly. I know some of my clients pay themselves fortnightly. Some people like to pay themselves monthly. I personally like to pay myself weekly. But that is where we pay our wage or salary to ourselves from the work that we do in our business.

Our fourth account is our tax account. Now I shared right up at the top of the episode, this was one of my little bug bears that profit first really helped me within my business. But when we’re running a business, especially if you are registered for GST and VAT and you are running a profitable business, you are going to have to pay the tax office. And there’s nothing wrong with that. Especially in GST or VAT is unavoidable. We collect money on behalf of the government as GST and we just mind it for them for a little while before the end of the quarter when we have to give it back to them. So literally minding that money for them. It’s never our money. We just have to give it back to them at the end of the quarter. 

That’s such an important way to think about GST because it’s never our money. It’s never money that should be used in the operations of our business, because that is going to create a huge financial stress. I can’t remember if it was in the profit first book or if it was someone speaking about profit first but they said it’s like someone giving you their handbag while they go to the bathroom and say, Hey, can you mind my handbag while I go to the bathroom? We don’t start pulling that money out and use it to buy dinner at the restaurant. We know they’re coming back to get their handbag. It’s not our money. They’ve just asked us to mind it for them for a minute. That’s kind of what GST is like.

Then we’ve got our income tax. Now, if you are going to make a cash profit, which I highly recommend you do. You are going to pay tax. You are going to pay tax. Now your accountant might do some savvy stuff and get you in a really great tax position. But I think it’s important to recognize it’s so much better to set tax aside and not need it, then to not set it aside, which was my personal problem and need it later. So that’s what our tax account is for. I’ve kind of combined tax as being your GST, your VAT, as well as your income tax together. Now some of my clients do like to separate those out into two separate accounts. I personally run my own profit first with both of them combined and many of my clients that have simpler businesses do combine them. But as there’s more complexity, I do think it is helpful to separate out GST, so that may become a sixth account if you have that value added tax in your jurisdiction, opening up an account for that separately to tax. 

All right. So the final account is the operating expenditure account. Often shortened to OPEX. So this is all the other costs required to run your business. It’s the product that you use on your clients in in-house it might be foils. It might be colour. It might be shampoo, conditioner if you’re a hairdresser. It could be your injectable products if you’re an aesthetician, right? It might be the wax, it might be the brow colouring. It could be the products you use on your client’s skin, right? It could be some of the smaller things like the towels and the cleaning. 

If you’ve got an online business and this isn’t just for online business, but it’s the subscriptions. It’s your coaching fees, right? If you’re paying a coach to help you. It’s your Facebook ads. It’s your marketing spend if you’re spending in other ways, it’s everything else that wasn’t your owner’s comp or your profit to run your business. It’s all the business expenses. And that’s our fifth account that we want to set distinct money aside for.

What we’ve covered off now is our five key accounts and what I want to help you see. Is. With profit first, the idea is that we come on a regular basis, a predetermined basis, profit first, the book does recommend twice a month. I personally do it weekly. Some of my clients who have very big businesses and just lumpy payments that aren’t coming through daily, prefer to do it monthly. There’s no one right way. But you determine what that is for a lot of my clients, it is weekly or bi-weekly/fortnightly. And we set a time with ourselves. We regularly do it. I personally do it on Thursdays. That’s when I pay myself, I sit down and I move all of my money out of my income account. Because over the week money would’ve got deposited in there. And it’s built up to, you know, whatever it’s up to. And we send that money to the four other accounts. 

So we send our income money to either our profit account, our owner’s comp account, our tax account or operational expenditure account. And what you can see immediately is it means that we’ve always got a current position of our business. And it’s harder to accidentally spend money on the wrong categories that creates a trap later. So for example, if income’s coming in daily and I’m like, today I pay myself and tomorrow I paid that bill and the next day I pay that bill and. You know, two months I do that and the bank balance keeps going low and I never set tax aside. It’s easy to overspend, right. Because we’ve just got this, like running, moving, flow of money that never gives us a true position of what’s happening in our business.

What I love about profit first and what Mike sets out in the book is that it’s bank balance accounting. Because when we do this system and we do it on a regular basis, if I know on Thursdays, I move my money from my income account, I do my allocations, that’s how we refer to it. I allocate it out into those sub accounts. I’ve got a position of where I am. At any point in time. And so if I log into my bank account and I see like my owner’s comp only has X amount. And it’s my payday. 

I can only pay myself whatever’s in there. . And knowing I’ve still got the separate money set aside in the operating account for my staff payroll, for the retail order I need to do for the product order for the four [00:32:00] subscriptions that are coming out for the accounting fee that I needed to set aside. 

I’ve got money set aside in a separate account for my tax. Right. I might’ve set aside, I don’t know, $500 that week into the tax account. And. Basically when they’re all swimming around in one big bucket. And I’m like, it’s time I pay myself and I like to pay myself. I’m just completely making up figures here. Maybe I pay myself a thousand dollars a week. . And when everything is swimming around in one category, I go in there and pay myself the thousand dollars a week. But actually the business could only really support me, pay myself maybe $750 that week. . What I’ve actually done is I’ve actually either spent tax money or I’ve spent operational expenditure money on paying myself and my lifestyle. I’m not setting enough money aside for those. 

So while that won’t matter on that day, at sometime in the [00:33:00] future. I’m going to have a meeting with my account, and then they going to say you are X thousand dollars to the tax office. And I’m going to say, I don’t have that. . Because I wasn’t setting it aside. So it, what it actually means is I was overspending somewhere else, but I couldn’t see it in this, , one big pool or, you know, in profit first we refer to it as plates. 

It’s all sitting on one big plate, kind of like the buffet, right. And it’s all in this one big buffet, and we have no idea of how much we’re actually consuming, unless we put it out onto those smaller plates. So that’s the idea of these accounts, right? It’s the same with operational expenditure, 

because I might say I’ve got $2,000 in my operational expenditure account to run my business. When it’s all swimming around in that big one, it’s so easy to be like, oh, it’s okay. I can spend three and a half thousand dollars. Cause I’ll make it back later. And then I’ll. You know, then I’ll have enough tax [00:34:00] later. That’s an entry into my brain of how I used to. I run my business before I put profit first in place. 

I was spending the tax money on operational expenditure, which truly the business couldn’t sustain. And so that’s, what’s happening for a lot of people. And that’s what having this five bank accounts starts to break that out because you’ve got a very clear view, obviously. In that assessment I spoke about earlier. It will show you when you work through that, what percentage of everything that comes into the income needs to get split out into each of these categories? And so it will give you a view of what, you know, when you’re setting that percentage aside. 

Well, I’ve only got $4,000 to run my business off, or, you know, I’ve set aside $4,000 to pay myself for this month. Like, that’s all I can pay myself. Uh, it puts that constraint. And then what it does is it starts getting you solving the right [00:35:00] problem. All right, because you’re like, Hey, I’m only setting aside $4,000 a month for paying myself, but actually I want to pay myself $8,000 a month and pay myself a six figure salary. What do I need to change here? 

And we start getting to work on the true business operations and efficiency, whether it’s literally revenue growth in that, you know, a hundred thousand dollar turnover business, can’t sustain a hundred thousand dollars salary. Right. Okay, cool. I need to grow my business or my B actually. I’m spending 90% of what comes in. I’m running the business and I need to figure out how to run that business more efficiently and take that maybe down to 50% and then 40%. 

And then I can pay myself a bigger percentage and I’ll hit the number I want to. So I don’t want to dive too much more into solving for those problems, because this is just a multi-step process. And we’re going to iterate over time on [00:36:00] all of the pieces that it starts to reveal, but just having these five bank accounts in place and doing that assessment and setting the money aside into these categories. Is going to start to reveal that for you. 

And that’s why it is such an eyeopening. Awakening process. I know for me, I’ll share this and I’m sure I’ll share this in the future. , I remember when I did this assessment. When you do the assessment, it reveals to you. How the money that comes into your business is being split across those four other categories. 

So we’ve, we’ve got five categories in total income is everything that comes in. You do an assessment and you figure out of the hundred percent of money that’s coming into my business. How has that being split across these four categories? And the next to that you see, you’ll see, there’s the profit first target percentages. Based on the size of your business. 

So there’s different [00:37:00] target percentages that you want to move to. If you’re in a business, say zero to $250,000 turnover, there’s percentages that you didn’t set there. If your business is 250 to $500,000 turnover, there’s different percentages. Because like we said, as your business scales, your owner’s compensation percentage comes down, even though it always sustains a six figure salary, I’ve done the maths on that. 

And I’ll do another podcast about that. Another day to come. But I remember when I did that. I genuinely felt sick. In my stomach. Realizing. How much I was spending in my business and how much I’d wasted. On. Sort of. Trying to grow and invest in spend and maintain the business. That was just far beyond what the benchmarks revealed. 

It should be. And that was an eye awakening moment for me, because as I’ve shared, I was spending the tax money on operational expenditure. [00:38:00] So I was clearly just spending too much in running the business. And I’d been doing that. For years. So like tax was my bug bear was always a stressful six months between doing my tax return and then trying to set aside tax for the next year. 

And also. You know, get enough money together for the tax bill that I owed. But yeah, I felt. Sick, it was also the reality check I needed to change the way I was running my business. And get more financial reward and more efficiencies from my business. And I’ve never looked back. I’m not saying it’s always easy. 

I’m not saying it will eliminate every single stress in your business. Obviously not. But it was the shift I needed. And it was the awakening moment. I needed to realize I’m spending money on all of these things in my business, and I’m not getting the benefit. I’m not getting the personal financial reward from it that I want. 

So it’s time to change that. And [00:39:00] that’s what this process can reveal for you. And that’s what simply doing that assessment, which again, I’ll mention again, linked off in the show notes. Combined with these five bank accounts. 

Could be the exact thing that unlocks more financial reward for you. I’ve seen it with my clients. 

I’ve seen it with myself. And I know it’s possible for you too. And seeing how it’s only five accounts. I know it’s five bank accounts and a lot of people like, Ugh, Right. I can give you two client examples, right? One. 

She loves. She’s probably listening to this. She was like, Laura, I don’t want to open the bank accounts. There’s too much work. My bank charges me, extra fees for having extra accounts. I don’t really want to do it. And I was like, okay, I get it. I get it’s a bit annoying to set up. 

It’s kind of like starting anything, um, I said, human me, you’ve hired me to do this work [00:40:00] together. Humor me do it for the three months. And if you hate it, You can go back, right? No harm, no foul. You will have spent, I don’t know, a hundred dollars or something. Um, and she is like, fine. 

Yep. I hired you or humor. You. I can’t argue with that basically. And she did it and she said to me , it’s so game-changing. Because I can open my bank accounts and see my position at any point in time. I don’t need to go to my accountant. I don’t need to look through zero. Just to get that, that picture. And it helps you make smarter decisions because you constraint. 

It’s like, well, I’ve only got X dollars, X euros, X pounds in my operational expenditure account. I need to be smart with the way that I spend that. So that’s one client example. Where? Yes I get it. I was the same. . When I read the book and I was like, oh my God, I’ve just been spending way too much money. And I’m not getting the financial reward [00:41:00] and I could have personally benefited so much more from my business over the years than I have. And now you want me to go and open all these new accounts and I’ve got a company and that’s annoying. 

So I have to sign all these papers and get the other director to sign and blah, blah, blah. But I did it anyway because the. The information was so star in terms of what I wanted to change. So I get it to hassle. But for me, I wouldn’t go back right. I had another client who was saying to me, can I do it in a spreadsheet? Can I just like work out the allocations in a spreadsheet. The problem with that is. We know that the way we check about whether we can spend money in our business is by opening our bank accounts, not a spreadsheet. And so yes, in the spreadsheet, you might’ve done your allocations and being like, okay, I’ve got. Of course, I’m just making these numbers up $4,000 allocated to OPEX and dah, dah, dah. 

But the money is still swimming around in one big [00:42:00] bucket in the bank account. When you open the bank account and be like, oh, can I invest in this coach? Oh, can I buy this online program? Can I. Hire this staff member. And we see all of that money sitting in that account. It feels like we can, 

and I’m not saying you can’t, but do you know that you can do the numbers back it up? And a lot of the time we won’t go back and refer to the spreadsheet and the spreadsheet becomes really complex because it’s like, okay, well, I move 4,000 into OPEX from the 10,000 that came in. This week. And then I spent a thousand, so I’ve got to reduce it by a thousand and now I’m doing my allocations again. 

Now I’ve got add 5,000. Like you’ve got to keep a running balance in a way that’s pretty. Tricky to do in a live spreadsheet. So I don’t recommend that. I just recommend investing the one hour. It will take to go and get the forms from your bank or open your online banking app or ring up your bank and open the accounts. And get it set up because I’ve had mine set up for years now and I haven’t needed to tinker with [00:43:00] it at all. 

So it was worth the time. , so this episode has ended up being quite long. We’ve covered the five bank accounts that you need to get started with profit first. And we’ve given some great context around what happens in each of them. We’ve talked about how to go and figure out how much to move into each of them. 

And we’ve talked about why using these bank accounts. Now I have a short YouTube video. I think it is. Around why use the bank account? So let me link that up as well. I’ll link that up. You can go and watch that I’ve got so many resources all over the place. . I’ll link up the it’s like a 10 minute YouTube video. You can watch that. , and come please. And let me know what you think about this episode, what you think about this system. Screenshot your new bank accounts and send them to me on Instagram. I will not raise, share those of course, but I want to celebrate you. 

And I would love to be hearing your feedback. [00:44:00] On this whole podcast, this whole concept of profit first. We’re going to dive into areas that are, you know, beyond profit first too. And we have in the previous episodes, but I would love your feedback on this episode on what we’ve spoken about so far. 

What questions do you have? All of the things I really want this to be. You know, hopefully a dialogue and a conversation. So come on over to Instagram. I’m at Laura J O’Hagan. , send me a message screenshot that you’re listening to this episode, tag me in it, share let’s have a conversation. Let me know what your biggest takeaway is from this episode. 

And if you’re going to set up those bank accounts, share with me so I can celebrate you for being an incredible action taker. I know you are, my clients are really driven people. They’re motivated. They want to take action. And when they learn about. How they could be doing things better. They’re pretty keen to go and do it. 

So I’m guessing if you’re here. That is oops. [00:45:00] I just bumped my microphone. That is probably you as well. So I would love to hear that from you, if you want help. In any of this in a more detailed way than of course reach out and book a discovery call. I will put the link to that in the show notes. I helped my clients pretty much implement the entire process. 

I do a deep dive into their business. Understand exactly where they are now, why they’re not getting the financial reward and the projects that we can work on together to improve performance, profitability, and cashflow. And we have profit first, fully implemented in the first month of working together. 

So if that’s you and you’re like this all sounds great. You’ve explained it really well. But feels a bit overwhelming or I’m really busy . I just need someone to guide me through it. Then book, eDiscovery call. Because I absolutely love doing that. And there’s just so much more that sits [00:46:00] behind what we’ve touched on with profit first, so far and how I work with my clients. 

There’s just so much more that sits behind it. So. I’m going to love you and leave you there. I did not think we will get to speak for this long, but obviously I have a lot to say I trusted has been a value for you. I think we’ve just really spoken on really practical things today. If you love this episode, please share it on your social media tag me and let me know. 

I cannot wait to hear from you. And I’ll let you go and prosper and profit, have an amazing day. Have an amazing week. Thank you for the incredible work that you do in the world, and I’ll be back in your ears very soon. Bye. 

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