For those who follow the Profit First accounting model, or something similar, what are your target allocation percentages for:
-profit
-taxes
-owner’s pay
-operating expenses
do you have other categories you allocate to, or sub-categories within the above?
Here’s a mind map i created to help visualize the Profit First model, in case anyone’s wondering what it is.Target Allocation Percentages.pdf (148.9 KB
I love the profit first method. I stared with my accountant about a year ago. The goal numbers are:
20% owner pay
20 % profit
15% taxes
30% payroll
10% marketing
5% expensives
I currently am a little off in the owners pay 16% and profit 17% with the majority going to expensives.
I would like to throw more money into the marketing budget but that’s what I pull out of the profits category at the quarterly allocation mark. And in he beginning it’s okay to put some of the profit back into the company as a reward. But I am on a strict 3 year plan to hit my numbers.
My coach tells me in two years my number will be exactly where I want them to be. So I can pay cash for new truck, Wfps, etc.
Most importantly if I don’t have the funds for something I don’t buy it. As opposed to the beginning where it was if I thought it could help I brought it or signed up for it.
Its going to living lean for a while with my numbers but worth it over the long haul. I am super excited about it.
Have you been following this accounting method for long?
Started full bore 1/1/2016. It’s gonna be a winner.
Nice. Your flow chart intrigued me and will be implementing the system immediately. Just downloaded the book and will start studying today hopefully. The benefits that I can see just from your chart are tremendous. Having seperate accounts makes accounting so much easier, forces me to pay me what i’m worth (which I demand from my customers and not myself… strange if you think about it), allows me to see my expense account and help me be more frugal with it. So much better than just having a business account and my personal account
Thanks for the post Caleb.
And thanks for posting it on FB Chris. Glad I didnt miss this
i really like this thread and others like it that discuss or share the overall percentages in the window cleaning industry it’s one of the main reason’s i joined. it is difficult to make plans if all your numbers are guesses.
i am still pretty new and my customer acquisition cost is running around 30%.
i really like the map, especially the tax accounts. in my photo business i used to a master card account that accepted all the master card deposits and while it was not officially a tax account it was not used on a daily basis so it was a stack of cash available when needed. at that time i had a partner and although not incorporated i set things up so that we each got a draw every payday instead of just dipping in and draining the cash.
after looking at the map above i see i need to get my banking set up better immediately.
thanks.
ps. any additional you can share like size of company, main income sources is also very appreciated.
i am trying to decide if i want to totally stay focused on residential window cleaning or add lawn service/snow removal for added income stability
If you Haven’t read Profit First by Mike michealowicz I highly recommend it. It’s a fun read and he breaks down the psychology of money management.
Top-down accounting (what most of us use) make sense in theory, but ignores human behavior. Instead of trying to change your deeply rooted habits, why not leverage them for your benefit?
Great thread Caleb.
Seem this winter people are sharing the “nitty gritty” about the way they do things and the way they operate there business more so now then in the past.
I like his line of thinking, and he seems like a ‘no shit’ guy.
Like a smoker who buys single packs, instead of a carton…, kind of makes you smoke less, not having 20 packs in the cupboard.
Great post Caleb. What mind mapping program are you using?
Mindnode. It’s an OS X app. And an iOS app. I’ve used mindmeister too, which is also great. That’s cloud based.
Mindmeister is a little more powerful, but it’s $10/month. Mindnode is $30 flat for OS X and $10 for iOS.
It’s been sitting in the office for a couple months thanks for the reminder I’ll start tonight
profits first!
Deep stuff
you will dig it. right up your alley bc
Ha.
I figured this would be a “crickets chirping post/response.”
(not from you, Caleb, but I figured I was a lone smoker in this group)
Point is, you take profit out of the equation.
You are left with Expenses,
Which forces you to take a closer look at how you spend that money leftover.
Same thing: if you are down to your last 2 smokes, and 19 packs at the ready
(You start to re-think how much you need to smoke those last two)
^ lol, i got the point and i’m with you. i’m not a smoker so i substituted “twinkies” for “cigs” and it all clicked for me.
@c_wininger Im so happy you started this thread. Its gearing up to be a great one.
The profit first system has changed the way I do business. Now I know most of my numbers, instead of just ballparking them. It also has made accounting fun. Looking forward to putting the funds in the profit. The hardest part was getting into a routine of doing it. In the beginning I was moving money every day to see if it I like the approach. Way to much work. Then after the newness wore off, it was 3 weeks or 10 days, kinda whenever I got around to it. Also to hard to keep track of the proper allocations. Now I converted a pest control friend to profits first and we do it together. Twice a month, and if someone doesn’t do it, they have to take the other out to dinner. And we like to party so there go the profits.
B[quote=“mattolmschenk, post:18, topic:35367”]
Now I converted a pest control friend to profits first and we do it together. Twice a month, and if someone doesn’t do it, they have to take the other out to dinner. And we like to party so there go the profits.
[/quote]
I love that. The author is a big proponent of people masterminding with other profit first users. There’s a whole chapter devoted to it.
What are everyones allocations?
