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Welcome to the Pet Grooming Business Podcast with me, Bill Betts, where we give practical business advice to help you grow your pet grooming business. This podcast is sponsored by Low Pay, the Low rate payment app that gives you more. So without further ado, let's get going.
Welcome, everyone. Welcome to this podcast and welcome to this live, if you're joining us on YouTube this time, because Facebook wasn't working, but welcome on the podcast as well. So I'm joined today by Tim Seymour and Crystal Lee and we are going to be talking about a different way of running your accounts, which is called Profit First. So welcome. Tim, how are you? I'm very well, thanks, Bill. Thanks for inviting me along. You're welcome. And you're. You're based in the uk? I am, I'm based in the UK and I, I head up the membership for Profit First Professionals in the uk.
Nice. Profit First. We'll get into that. Profit First Professionals say that after the nice tool. Yeah. Crystal, you join us from the. From the States. Welcome from the States all the way. Yeah. Early morning here, so. Yeah, thank you for having me on, Bill. You're welcome. And so Tim's going to be the leading on this around the. The subject of Profit First. And Crystal, you're going to kind of put us into how it works in the. And keep it relevant for the States as well, aren't you?
Yeah. So some people listening may have heard of the book Profit first, but I wanted to take us from the. Some like pretend that I'm just have very little knowledge and perhaps we can, we can go from there. Tim, so what is the concept of Profit First? Yeah, sure. So there's kind of two ways to answer this question. So the first one is about the formula. So as you know, when you look at a set of accounts, you've got your profit and loss statement and you take your sales and then you remove your expenses and then you're left with your profit.
And what happens is profit kind of happens at the end. It becomes a thing that happens at the end of the year after accountants produced everything for you. And then they tell you whether you've made a profit or not. And quite often or not, you know, as a business owner, you're going to be saying, okay, great, I've made a profit, but where's the money gone? And that. And that's a very common question. I remember this from my days when I had my own accountancy business before Profit first in my life.
And then, and then the great. The next part to that is it's six months after year end already and you've made a profit. So you've got a tax bill that you've got to pay in three months time. You didn't actually realize you made a profit in the first place, so you've not put money aside for the tax bill. So it's a kind of knock on effect. So with profit first we flip the formula. And the reason behind that is because there's a thing called the primary effect where we tend to focus on the thing that comes first and we forget about the thing that comes last.
So if we flip at the formula and instead of sales minus expenses equals profit, we turn around and say, here's our sales, let's take our profit first. And what we're left with we can run our business with because that's our expenses at the end. And so the ideology behind that is to remove money from the current account where the sales income has come into, into a separate bank account called profit. That means there's less money in our current account for us to spend on running our business because we don't remove some of the money by default.
We will consume all of that money up in our expenses because we believe we need to spend this money to run our business properly and efficiently. When actually through a bit of creative thinking and a bit of innovation, we can run our business on a lot less money than what we believe. Do people believe that they need to spend this money to try and reduce their tax burden? So they just think, right, I'm just going to spend it and spend it and get rid of it. There's definitely an element of that thought process.
But of course I've kind of introduced the concept of profit first and I've just talked about a profit account, but we also have other accounts set up for one, being for tax, of course as well. If, if you're providing the money into a separate pot and you're aware of what your future tax bill is going to be and you can see that money, you're not going to worry about the fact you've got the tax bill coming because you know you've got the money set aside. The, the issue of spending money to reduce the tax bill comes from not having the money saved up in the first place.
Right. And why, why would you spend £10,000 on a van say just before the year end to save £2,000 in tax? Because you still spent £8,000 you perhaps didn't need to spend. So there's got to be a better way of doing things. And Profit first takes you down that road of thinking differently and having a different idea of how to move things forward financially for your business. So it's like a proactive way of predicting and saving for taxes and other things that come up into your business.
Yeah, paying yourself as well. So, so the other, the other part that we would talk about is owners pay. So paying yourself regularly on time, making sure you're, you're, you're earning enough money from your business to cover the personal side of your life and your personal finances. And then as you build up money in the profit pot in the background, then you can reward yourself from that pot at the end of each quarter. So you get your, your normal salary coming out, however you decide to pay that.
There may be people on here that are self employed, there may be people that are limited companies. So it may be a mixture of salary, it may be a mixture of salary and dividends. It's regular each month. And then at the end of the quarter you reward yourself from the profits that you've built up as well. So at least when you get to the end of the year, you've made a profit you're aware of and you know you've made a profit because you've taken some of the money out to actually celebrate the fact that you've made a profit for that business each quarter.
And you've accounted for the, for the taxes that you pay or may have to pay in the future. Absolutely, yeah. And you know, well, people that are profit first professionals or in the world of profit first and understands how it works, they will always be forecasting ahead for you, always looking ahead. And so as a business owner, if you're able to look ahead and say, okay, this is where I think my revenue is going to take me, my sales income is going to be at this level.
I've already worked out what percentage of that I'm going to take in profit. I know how much I need to take out each month in my owner's pay to pay myself. And then I'm going to need a portion of money as well to save up for my future tax bill. Then what's left I've got to run my business on. So you can work out whether your margins are right on everything that you're doing for your customers, etc. And then you can analyze how much have I got to spend to be able to run this business and what can I do to make it even better?
So does this put like a different way of thinking around?
So you allocate, I'm trying to get my head around you allocate your prop. You understand what you, you're predicting for the year. So what you're, you're looking to earn for the year, you're then looking at how much money you want to take in a sort of salary or, or to pay yourself. And then that gives you the, the profit you got left. And then you put pressure on your business to, to spend less, I suppose. Is that in effect, in effect, you want to, you want to be trying to spend less.
But of course, let's be real. There's only so much cost cutting you can do in a business. So, you know, I don't advocate cut, cut, cut, cut, cut, because you won't have, you won't be able to bring the income into your business. So there's only so far you can go with that. So it's, it's looking at your costs in a strategic way, understanding for each cost, what return is that given me on my investment I'm making for that cost. And it may be that, you know, it's helping achieve, you know, for the businesses we're talking about, obviously going to have some labor, and they can have some labor costs in there, and they can be there.
You can measure the profitability of each labor cost that can be looked at, and you can make that as efficient as possible. So that's one way of dealing with the issue without cutting costs. It could be that you're subscribing to things you don't need to, and it just, they're just taken into your bookkeeping every month because they recognize as something that you pay for without thinking about whether that cost is actually relevant to the business anymore or not. Might have been a good idea at the beginning, might not be actually worth it now.
So that's one area to look at. But of course, you know, the income of the business, of course, also comes into play here because we're looking at percentages of how we're going to move money into the pots. But what I should explain is if I reverse back a little bit to the starting point of anybody's journey with profit first, and that's that you would run what's called an instant assessment. So your numbers up to this point in time would be analyzed and you would say, okay, so at the moment, this is what's happening with the money in my business, and this is telling me perhaps my operating expenses are about 90% of my turnover, and I'm only paying myself 10% of my turnover.
Therefore, that's why I Don't feel like I've been rewarded for everything I'm doing in my business. And I'm spending a lot more times on constantly trying to increase the sales revenue. What you would do then from that point on and say, okay, so I don't want that to be 90%. I don't want my cost to be 90% of my turnover. So I need to start to reduce that figure gradually by percentage. So you may want to get that down to 85%, then you might want to move Karamove and get it down to 80%.
And while you're doing that in the background, the flip side to that is you may be then paying yourself 20% or you may be paying yourself 15% and putting 5% into profit. Do you see what I'm trying to say? So that obviously there's only. You can only get to 100. So you have to kind of work out how to sort of strategize over what those percentages will be. That's where Profit First Professional comes in. Obviously, I'm gonna, you know, be quite, quite firm about that because obviously no one knows better how to do these things than certified Property First Professionals.
You can, you can read the book and you can work Profit first through your business, but working with a Profit First Professional would give you that support and accountability for everything I'm talking about to actually take you through that and hold your hand through, through the whole process, as opposed to you, unfortunately, scratching your head and thinking, I can't quite work out how to write the numbers on this. Of course, this podcast is sponsored by Low Pay. Low Pay is half the price of Sumup and Zettel.
So you keep more of the money that you earn. Rate starts at 0.79% every. Every day. Every every day. Accounting is hard enough at times, so, yeah, putting that twist on it. So if I was to come to you as a, as a limited company and I've got one bank account and everything goes through the one. One bank account, it will be a. It's a starting bank account because I love the Challenger Bank. Do you have the bank accounts crystal in America where you can do pots and stuff?
Yeah. Yeah. So. So what you were just saying is very true. Most of my clients that do start with us, they have maybe one or two. They have a checking account and a savings account. Maybe, maybe they're lucky. And so everything just goes, like you said, into one account or one pot, so to speak. And so what will happen is they're like Tim was alluding to earlier is that if you have all the money in one location, you're going to just eat whatever you can. Right? It's the idea of Mike's.
Mike's analysis, the author of Profit first, when he was talking about the different side plates. When you go on a diet, if you have these really large plates with everything on it, you're going to eat everything on that plate, whether you want it or need to or not. And if you get the smaller plate sizes and portions, you will eat less food, but still be satisfied, and you'll still be able to move and do everything that you need to do. The same concept can be applied to this business.
So whenever you have these different bank accounts, and there are five of them, by the way, and whenever you have these different bank accounts, you're able to allocate your percentage of revenue into each one of those accounts. So therefore, at the end of the month or end of the year, you're able to pay your liabilities. But the biggest thing that I've seen are how many business owners don't pay themselves. I mean, I cannot tell you how many times I've heard, you know, I've been working this business for weeks, months, or even years, and I have never taken a paycheck.
And that's heartbreaking to me because clearly, we're not getting into business to not make money. Right? That's why we're doing this. It's for that financial freedom, so we can experience freedom in our own lives. And that's essentially what profit first does. I know when a lot of my clients first come to me and they start up with the process, the biggest concern they have is I can barely afford to pay my current bills. How can I afford to put money aside? And then I have to ask them, how can you afford not to?
Because all of this is still due whether or not you have the money set aside. So I do challenge everyone and even your listeners, if they are having some financial issues, to even just start with a single profit account, to set up a new savings account, call it profit and just do 1%. That's all you have to do. Just do the 1% allocation. I recommend one day a week, you know, that you start transferring the funds for everything you had the week prior. So all the revenue you had the week prior, just move that 1% over and you will start being surprised how easy it actually is.
And, and I want to also kind of reiterate to Tim's point earlier about how it's not just about the. The expenses we're not trying to get you to cut everything. Right. Because your business has to function, it has to work, but it's to make you aware and cognizant of what you're actually spending money on. Do you have subscriptions? And I love his idea about the subscriptions. I cannot tell you when I first started Profit first in my own business, how many subscriptions I had. I had over a hundred dollars a month.
I was paying in subscriptions I really didn't use, or I could. That were basically dual subscriptions, basically doing the same thing. And I didn't need all of them. So I was able to cut some of those out, changing my phone plan. I didn't need as high of a phone plan every single month I had. And so it's just kind of getting, like you said, getting creative with that. And then you can also focus simultaneously, two sides of the same coin where you're also looking at income as well.
So it's about the income, but it's just also as important for getting your expenses down. So, yeah, I like that idea, the idea of profit first, because it sounds like it actually gets you more involved in your accounts. Like a lot of people that I work with, when they join my program, they're very unaware of their expenditure. They're very unaware of their income. And that causes them to overwork, it causes them to underwork, it causes them loads of fear because they just don't know what, what they've got coming in and going out of their accounts.
But we quite often, the sole traders and sometimes limited companies, they just wait until the end of the year and they're like, right, tell me, tell me the damage. You know, tell me what I've done, how much of money ever made. And I was doing some workshops recently and, and I'm always surprised at asking people, how much do you want to earn in your business? How much do you want to turn over in your business? And. And people say, I don't know. But if, but then I sort of say, well, if you went for a job interview, if you went on to indeed look for a job, what's the first thing you'd look for?
You'd look for the salary. So why are you not thinking about this within your business? So I like the fact that you have to get involved in the profit first, don't you? You need to know your expenditure and your income by the sound of it. Exactly, yeah. And so what I was going to say is that when you're more involved, you're also better able to make those Decisions. And I think it also helps you with what I call, you know, goal setting for both the short and long term.
And so what we try to do is within my clients, within profit first. What we do is we try to make sure that they have the idea of where they want to go in the next one to three to five years. You know, are you wanting to expand if you're a mobile groomer, are you needing to buy a new van anytime soon? And the thing is, you can utilize profit first in such a way, that way you're putting money aside also for those big expenses, those long term investments.
And so that's very important key because, yeah, you want to make money in the next six to 12 months, we all do. But you know, where are we going to go, what machinery, what equipment are we going to need to replace here in the next few years in order to sustain that? So it helps you to plan as well. So, Tim, let's go back to. I'm a limited company. I've got one bank account with a Challenger bank. And I come to you and say, I'd like to, to like to look at the, the profit first idea.
Where would you, where would you start? With someone like myself? So I, I would want to look at your current figures and produce the profit assessment that we talked about just now so that I can understand what's happening with your money right now. And that would tell me the starting point, what your allocation percentages are. So that would say if there's a percentage put aside for profit, it would tell me if there's a percent put aside for tax, it would tell me how much you're paying yourself.
So I'd be able to work out what percent of your income is going into your owner's pay. And then the rest would be the operating expenses. So I would know what percent that is. Now we could go deeper and into different areas, but I think we keep it simple and stick to the basic foundational accounts for now. And then what we would do is we would say, okay, so your bank was Stalin. So I would say open. I think in Stalin they call them spaces. So I would say open up some spaces.
Open up one for profit, open up one for owners pay. Open that one for tax. Okay. And then your operating expenses, you could have a, you would probably want a separate current account for your operating expenses. So what you want to have is, is one account for your income, which is called your serving tray. So using, following on the analogy that Crystal used about the plates, the income account is your serving tray. So the money comes in there all the time. And I love the fact that Crystal mentioned about doing the allocation into a profit pot once a week.
I always say this as well, and I always say the same time, the same day every week. So I tend to do things like that on a Friday at 9:00. That's just my preference. But someone I work with says you should do it on a Monday at 9 o'clock because then you're paying yourself for the week before you've even started your week's work. Yeah, I think that's a lovely way to do it. So your money's come in from the previous Monday through to the next Monday. You go on there, a percentage of that money, then you move into your profit pot, another percentage, you move into your owner's pay, another percentage, you move into your tax and then the rest of it goes into your operating expenses.
Now understanding the starting point of what those percentages are, are key to be successful. If you pick up the book and try and just hit what Mike says are the ideal percentages, you're possibly going to run into trouble. So, you know, that's why you need to understand where you're at from the word go. And you know, in the U.S. crystal would be able to do that for, for the US people on the course straight away and she better be able to produce a profit assessment in fairly no time as long as she's got access to people's numbers.
So the, so I suppose we know what our tax rates are in our country, so I suppose that's going to be pretty much fixed, isn't it? And once you, once you learn how much money we want to take as an income, as a pay, that would then become fixed. Is the profit side of things fixed or does that fluctuate because of expenses go up and down throughout the months. And years, Tensions go up and down. But what we're trying to do is take out these peaks and troughs out of the equation and create a rhythm of your money.
So what we want is the money to be coming in in a consistent manner, be able to fill up these different pots throughout the month. When we get to the end of the month, we want there to be enough money for you to be able to pay yourself and your owners pay. That's what we're aiming to do. We want there to be enough money in your operating expenses account so you can pay all the bills you need to pay. And of course some of these are going to be on direct debit, etc throughout the month.
So we have to take all that into account.
When you first set up profit first, there's a little period of instability and there's a little bit of, you'll get some obstacles along the way and a little bit of resistance to, to actually sticking with it because there will be a couple of hurdles because there may be an annual bill for insurance that you, that you've got to pay. And you think, well, what do I do now? Because I'm moving all this money out of these accounts and I've not got the money to pay that bill.
That's when you would talk to Crystal, you would talk in the uk, would talk to professional and they would help you manage through that, that situation. These things happen. But the end game is that you're going to, each quarter improve on the percentages that you're putting into different pots and over time you're going to better pay yourself more money. Over time you're going to have more and more tax building up in the background so you can cover your future tax bills without stress. And hey, isn't it great if you get to the end of the tax year and you've been tax efficient and you've actually got a lower tax rule than what you've saved up because then you could reward yourself with some of that money if you chose to.
You could use that money to, to put into your profit pots, reward yourself. Your choice would be yours. So, so it's just the ongoing flow of money and an ongoing journey with profit first towards what you want to achieve for your business. So when you say at the end of each quarter you're looking to put, you know, make your percentages better, is that because you're, you have a better awareness of what's going on with your money, which then hopefully gives you a better awareness of your business, which then makes you maybe market better or say, actually I need to put my prices up because I'm not meeting my targets.
Does that how you do it or because you, because you can't really force it, can you? Something has to, has to change within the business to, to have more profit. Yeah, it's, it's called the rollout plan. But Tim, if you want to describe that. Yeah, no, good for it, Crystal, go on, you carry on. Okay, that's fine. So, so essentially when Tim was saying that everyone starts somewhere, we do the profit assessment, we get your actual percentages of numbers. Oftentimes what I have seen in my clients is that they're starting 85 to 90% in operating expenses.
They're not paying themselves anything in salary. For owners pay, they may have 1 to 2% if they're lucky in taxes. Some have paid none. And they are honestly past due on their taxes. So they're starting at literally like a very precarious position, I'll put it that way to say lightly. And so. But it's okay. The thing is, there's no judgment here. We, we need to know where we're starting from. And so with those numbers, then we start having a rollout plan is what it's called. It's called a rollout plan where we, every single quarter we will up the percentage that you actually have.
So if we don't have profit, we start with 1%. If you don't have owner, owners pay and you have very little wiggle room, 1 to 2%. So we just start slowly increasing that. Every quarter we do an evaluation and we check in with the business owner to see how are you doing. Are you able to stay on top of all your bill payments? Were you able to cut down on your expenses and then therefore you don't need as much in operating expense. Right. If you're able to cut back on those expenses.
And we also help you find, you know, ways to help you market, Bill can obviously help you with that too, to help you market your company and brand your company a little bit better. So you're getting more of that recognition and that income stream coming in. And so it's a way to be creative with that. But the, but the rollout plan, what it'll do is eventually get you. We'll just use profit as example. You know, we started with 1% on quarter one and then now after about four quarters, we're at like 6, 7, 8% now.
So you're automatically doing that. And it's a slow adjustment. And the thing is when you do it slowly and incrementally, then you start being able to maintain that. It's almost like I say, I know I'm person to say this, but going on diets and things like that, if you lose weight very quickly, what typically happens, you gain that back. And more typically when, when you stop doing that and it starts becoming overwhelming. So for example, if you're not paying your taxes on a regular basis and you have that money allocated for taxes and let's say, Bill, you said, well, we know how much the tax rate is and that's great.
It's great to know that that's where your benchmark needs to be. But if you go from paying 1 to 2% in taxes on your income to paying like 15, 16, 17%, that's a really big jump. And so a lot of people cannot sustain that. So the idea of the rollout plan is for sustainability, is to get you, you slowly healed, is to slowly heal the business. And Tim, you can add on to that however you want.
I think you've captured it nicely and I think the, the key part is that it's always, it's an ever moving journey with profit first. And the idea is we're always looking to improve on your situation. That's, that's the aim. So initially we might be able to get into a position where you're earning enough money to pay yourself so that you can cover your personal costs and personal things that you need to cover. Then it might be how can we get you to the next level, which means perhaps you can have a holiday next year and then the next level, which means maybe you can have two holidays, maybe you can buy a car, you know, and we're gradually moving into that point that, that not as quick as I've just spoken it, by the way.
Exactly. Like Crystal said, it's small incremental steps. And the beauty of profit first is it becomes a habit and it becomes a way of managing money. And you, and you think to yourself afterwards, how did I manage without this in my life before? Yeah. And the reality is you weren't managing perhaps as well as what you are now. And that, that's the beauty of it. It just helps you see the light and have clarity on where the money in your business is going rather than having to wait for a set of management accounts for an accountant that, let's be brutally honest, a lot of us don't really understand.
And it's quite hard to, to, to pick out the pieces, the important pieces that you need. Whereas if we just look at your bank accounts, open up your starting app, look at your spaces and think, hey, it's halfway through March and I've nearly got all of my money set aside in my owners pay. So for the end of March I'm going to have more than what I need to pay myself, which means there's a little buffer building up in that pot because I, next month I'm going to pay myself the same the month after the same because I know the Easter holidays are coming and my business is going to go quiet.
Easter holidays might be a busy time by the way, but I'm just using that as an example because these things happen in real life. Yeah. The money doesn't come in consistently Weekend after week. Sometimes we have busy weeks, sometimes we have quiet weeks. This takes out that issue, because of money by percentage is going into these different pots consistently. I think the theme that keeps coming out for me listening to you guys talking is that awareness. And like you were saying about like a management accounts, you don't, you kind of like, you get to year end and then you don't see anything from your accountant for quite a few months if they're, if they're busy or you haven't updated all the paperwork and given everything they need.
And all of a sudden you landed with that tax bill, aren't you? And, and this is something my accountant sort of says to me, you know, this can all be planned for. But I think, I think for some of my clients there's a reluctance to pay for accountancy because they feel, I think this is because they don't get much feedback coming back. They don't get a lot of help. So they think, well, actually, why am I, what am I paying for? I suppose. And then, I suppose if, if people don't understand what they're getting at the end of the financial year, then they're like, well, I've just paid for that.
But actually, what does it mean? What does it mean? It becomes reactive, doesn't it? Whereas. So one of our Profit first guys, Jason, came out with this thing once and I thought was a brilliant way of capturing the reality of this. And he said, accountants work in the past, bookkeepers work in the present, profit first, professionals work in the future. And I think that catches it perfectly because we're proactive, we're looking ahead all of the time. Yeah, the starting point is what's happened up to here. But from that moment on, the rollout plan that Kristal mentioned, the quarterly reviews, we're always looking ahead to where we can take you next.
And I think as a business owner, that's what you need. You need that proactiveness. It's no good having a reactive issue. Like you say, six months after year end. It doesn't help anybody. And arguably, yeah, you get what you pay for. You know, if you're only paying your accountant a few hundred pounds a year, and maybe that's the service you're going to get from them. But if you partner up with someone that can actually guide you and mentor you and sit next to you, you know, when have those conversations, as opposed to sitting opposite and delivering you the bad news about your tax bill, you know, to see the difference, you know, sitting next to someone, being able to virtually Put your arm around them and say, look, it's okay.
This is where we're at, but we can deal with this and we can help you move forward. This time next year, we won't be having this conversation because you're going to have the money saved up because we're going to guide you in how you can do that. Next year your tax bill won't be coming off your credit card. You will be paying for this out of this pot because this pot will have more than earth money saved up. And, and that's the difference. And so the return on investment of that, when you look, when we're talking about costs, it's a different conversation.
It's not just the cost. There's a big return on that investment to having clarity on your numbers. Being able to move your business forward with, with the decisions that you make as well are a lot clearer. Yeah, it's that mindset, isn't it? That reassurance. And when it comes to submitting tax returns and end of year accounts, I take it, you know the way that it works because it's so up to date, it's pretty much, you know, instant. You're doing your tax returns as and when you needed.
Yeah. And so essentially what I like most about this is that you're not only getting a partner with an accountant and sometimes a lot of accounting firms also do the bookkeeping. So they keep your sets of books up to date and current like you said. But what I love most about working with the profit first professional is that you get almost like a built in coach, you get a business coach built in. And because the way that we're trained is that we have, we have to be able to help you navigate those, those kind of complexities within the business and those decision making ideas.
And so therefore you get, you get kind of like a three in one, you get a bookkeeper and accountant that help you do your taxes and then you also get the business coach. So it's definitely worth, like he said, like Tim said, it's an investment, but it's definitely worth it. The amount of the return you get on the back end of it within keeping money in your company, being able to make more money in your company and also get really solidified on the direction and the vision that you have for your company.
We also help you do that as well. So. Yeah, and I take it, you know, I use the example of a limited company, it works for sole traders and their end of year accounts and everything.
It absolutely does everyone. Sorry, Crystal. No, no, you're fine. You can tell we're both enthusiastic about this. Yeah, it works in any business. In any business. And so I suppose people might be like shouting out, well if this is so good, you know, it's too good to be true sort of thing. If this is so good, why, why is there any. Why is it difficult to find a profit first professional? Why? Why aren't all of our sort of high street accountants sort of practicing this? Is this not taught in accountancy school?
Is it scorn upon in accountancy school? You know, why, why is it? Well, honestly, from my opinion, having gone to accountancy school, I can tell you that we are trained in the traditional, like you said, the traditional formula of your, you know, asset, you know, your, your income less expenses equals whatever profit is remaining over. That's what is drilled into us continuously. And that's what most accountants look for. And within my peer group, so to speak, we've actually discussed profit first several times. Some accountants say it's, you know, they don't, they may or may not prefer it.
It's just a preference, it's a personal choice they have. I think it's more so. And sad, sad to say, but they may say, well my client's not going to stick with that so I'm not going to, I'm not going to go there to begin because they're not going to want to do this. But the thing is a true profit first professional that's trained in a CPA firm that actually does do profit first can really help you get to that next level. And they see the, almost the instant gratification for it because literally it's the idea that you make profit day one, you start making profit immediately, you don't have to wait for that month in or that year, year end profit loss statement, you know, what profit you are actually making, I mean from day one.
So that to me is, is a gift in itself.
It's. I was just thinking what you just said there, but I think I had quite. When we started our business we had quite an old school accountant I suppose and when, when it came to paying ourselves, we took mostly salary and he would say, well, you can't take dividends because you don't know if you've made profit yet. So that was kind of like, that was the wait until the end of the year to see if you've made profit and then take your profit shares. So that flips all of that on its head, doesn't it?
Does, absolutely. And that's the proactiveness of it. Because you know you've got the money. Well, what happens when you, when you, when you're working in a reactive manner is you're taking money out of your business, not really knowing whether you should or shouldn't be taking it, but because you have to, because you've got to cover your personal costs and then you get to the end of the year and then you can have a problem whereby, especially in the UK with limited company, you've suddenly got an overdrawn director's loan account which needs to be repaid and if you don't repay that, pay that within nine months, you're going to get hit with a tax bill.
So there's that, there's that issue. But if you already know you're taking money from your profit pot because you know that money is profitable, you don't have to worry because you're only taking money from the profit pot. You're not, you're not taking money from areas you shouldn't be taking it from. So the, the Profit first formula is that kind of flipping it and making sure you're proactively taking money out. And yeah, I, I agree with Crystal as well. You know, I trained as an accountant. I had an accountancy firm until I heard, until I read Profit First, I was that guy, I was there, I used to deliver the accounts after year end and I used to give the bad news to people.
I used to hate every contract conversation I had on those bad news conversations.
And as soon as I read Profit First, I had that light bulb moment go off in my head and I thought, why, why exactly. Why am I only finding out about this now? Why aren't we all doing this? The answer is, I guess it's not for everyone. Not everybody wants to go against the traditional way of doing things, but those that do are the ones that are leading the way now for Profit first, especially in UK and Ireland and Crystal in the us, you know, we're leading the way and we're delivering a different type of service than what a traditional high street accountant will be able to deliver.
And I think that's what stands us out from the crowd. You're, you're a challenge. You got Challenger banks and they got Challenger accountants in a way, yeah. One thing I need to add, sorry, Crystal, just, just to clarify for the UK viewers, is that we still have to conform to the statutory compliance and everything is, is of course, you know, sent off to HMRC and companies housed in the right structure. So we're not, we're not saying we don't do that, of course, we have to do the compliance.
Right. As well. But it's just the way of managing your money, the way of looking at your numbers and the way of looking ahead. And obviously within the uk, we've got Making Tax Digital being forged ahead by the government. Is that going to change how Profit first works with. If they want quarterly updates as to what profits you're making and stuff, I. Think it falls in line perfectly with Profit first and how Profit first works. To be perfectly honest with you, I think it's actually playing into our hands a little bit because we like to have a quarterly review so that we can change the percentages.
Change percentages up. As Crystal said earlier, you started on 1%, let's get it to 2%, let's get it to 3% next quarter, 4% the following quarter. It actually will work out really nicely for anybody who's having, who's working with a Profit first professional. They'll be able to submit. Yeah, making Tax Digital returns easily for you because they'll be on top of everything. They'll understand where the money is. They understand what's happening in your business. Yeah, awesome. And I was just thinking, if you had these principles within your business, do they then transfer over into your personal life?
Because obviously I've got starting. I've got a starting account for my personal life and we've got pots. So can you just take the same sort of concept and. And put it into your personal life? Yes. Yeah, for sure. Absolutely. Yeah, yeah. It's, it's just, it's just a way of controlling the money. And what I like to tell people is it doesn't take place with any financial software. You need the financial software in order to be able to do this effectively. But it's just something that sits on top.
It's an idea and even almost a psychology that sits on top of your finances. Therefore, like I said, you know exactly at all points where your money is. And there's no more having to just decide, having to dig in and no accounting. Right. As a lot of these business owners, they're not trained accountants, but that way, based on your bank accounts, the way that they're structured, you actually can just look at your bank account and even see, okay, I have this much money for taxes, this much money for my pay, so I kind of already know how much I have to spend within that.
And it gives them a little bit more of an idea because, you know, I personally know with my clients when, sometimes when they sit down with me, they, they just Start getting that glazed look on their face when you start going over the numbers and, and they're like, and honestly, sometimes even fear, because there's a lot of fear that goes behind finances. And that's okay, you know, that's, you know, there's a reason why that's there. So we kind of help you work through that. Mostly the fear of not having enough, that's where it really stems from.
This takes that out of the equation. So therefore you have the idea of, well, I know how much I'm going to have, this is how much I need. How can I get from point A to point B? That's what this does. And then when you take your salary from your business or take it, you then split it, divide it up amongst your personal bills and savings. Yeah, yeah. And also there's a, there's a big one within, especially within the grooming world that I get a lot is how, you know, how much do I need?
Like Bill, you mentioned earlier, when you go into a job, you already know the set salary idea that you have in your mind. And so when you go into it, I always tell people to work backwards. You know what, make a list of your bills. Like how much do you need to actually survive? You know, that way you have a starting point of what you need to make within the company and then you can use profit first ideas to get to that. So when I get that paycheck for my salary from the business and I can go, this percent goes to rent, this percent goes to food and this percent goes to utilities, things of that nature.
So that way you can put it that way. Same, same difference.
I do practice the pots and I'm not, I don't do profit first within our accounts, but I think there's a, there is a bit of a merger between how I work and the accountant I use very aware of profit first, I think, and I do sit down for two hours a month to really look at the accounts and like you said, you get what you pay for. I pay quite a bit of money to, to sit there and be mentored by them. But I found, and this is mindset, I found that all my money was in pots.
And I'd look at my bank account and go, ah, there's like 20 quid in there. And I was like, but that's probably, actually that's where I hadn't learned the percentages and I had bills coming up and I, I didn't have to move money out of pots to go into the current account to pay the bills. So obviously I wasn't doing it right, I'm not getting it right. But my mindset was my, my brain was spinning out because the current account was empty and I'd look in, there'd be like 15 grand in pots.
And my brain was just wasn't computing that. Yeah, I had no money. It's the, and honestly I'm glad you brought that up because it sometimes the opposite effect does happen within profit first. The key to a successful profit first company is to make sure that when you move the money, you leave the money where it needs to go until you pay it. For example, if you have a tax area, the tax account, you don't touch that money until you pay your taxes. And so sometimes people will dip in, I say dip in and they'll take a few hundred out here and there because they have an unknown expense to come up.
And then therefore that's when profit first starts crumbling. At that point it's no longer going to work for you. It's not just a holding account, it's a holding account earmarked for a specific purpose. So you need to make sure it stays in there. And so yeah, just be very mindful. That's another reason why it's so important to work with someone that somewhat holds you accountable. You know, we're not going to bully you, I promise, we're not going to believe you, but we do hold you accountable to say, okay, you know what worked for you this quarter?
What didn't? Okay, how can we look at that if you had to pull money out, how can we be better prepared the next time this happens to prevent that from happening and so. And to get you back on track. Yeah, because some people might worry that they've got money scattered all over the place. Obviously it's easy with the challenger banks to see what it is, but can you automate that process the percentages to just, you know, as the money hits your account just gets spread out and.
Spread through you can. I personally don't recommend it. And the reason why is because it's about creating a new behavior and a habit of how to manage your money. So whilst you could have, I think Revolut will do it, you can set percentages up for different parts. So as the money comes in it automatically goes and whizzes into these different places. Which sounds fantastic, but personally I still do it manually, same time, same day every week. And I think it helps you understand the control you've got over the money in your business and in your personal life as well.
And Perhaps I didn't have that five or six years ago. And I can honestly tell you it's such a, it's such, such a sigh of relief to be able to just say, you know what? I know exactly where I am, I don't need to worry, everything's fine. Five, six years ago. I wasn't saying that, trust me. So, you know, and I think profit first is actually, this may sound dramatic, but profit first is life changing because once you get a handle on how it's working and you start to see the benefits and the money building up, it becomes like a drug.
The more you do it, the more you see the pots building, the more you want it to keep going and you want it to keep being successful. And then you tweak it each quarter and suddenly it's getting more and it's getting better. And at the end of the course you're paying yourself a profit reward, then the next quarter you're paying yourself a little bit more. And by the time two or three years come along, you're paying yourself nice sums of money because your business is built up and built up and built up.
If that's what you want for your business, of course. And it is life changing. It really is. You know, I, I had an accountancy business, a sold accountancy business, trust transitioned into coaching. And then I, and then I was lucky enough to better get the license for the uk And I don't know if Profit first professionals. And now I come on calls like this and talk about one of my most favorite topics there is, which is profit first. And I mentor and guide accountants and bookkeepers to do better jobs for the clients so the clients on here can have a better service from the accountants and bookkeepers, which is exactly what we've been talking about.
Really. So, yeah, you know, as, as coaches, we always say, you know, if you do the same thing, you get the same results. So if people are frustrated or they, they have that niggling question, there must be, is there a different, a better way to do this? Well, there is, isn't there? But the education's not out there. We don't, unless we start googling, how do, how do I run my accounts better? You might not even find like profit first then. So when I, when I found out or heard about this through another mentor, I was like, we need to know more about this.
I want, I want to learn more about this. And obviously I have tried to read the book and it, or listen to the book, it is a can be. For me, it was a Tough read. I was like, there's a lot of information there. I'll probably have to go over it a few times. But this is, the whole point of this is just to, to make people aware that there is a different way of doing things. And that's the beauty of business, is that you don't have to be tied down to, to one thing all the time.
Yeah, for sure. And there's also just for your audience as well, sometimes the Profit first for the standard book, the regular book that my wrote, which I love, I've read it several times. But you're right, Bill is sometimes it's not an easy read for other people. There are other books out there from, by Profit first professionals that they have written specifically. There's one out there for Profit first for Creatives. And I also, I may or may not be looking into doing one specifically for Pet Groovers. So hopefully in the near future maybe Tim and I can work together, something like that.
That would be awesome. So yeah, so we could all maybe work together. But, but the Profit first for Creatives I think also allows you to be able to have the artistic mindset. Right? Because sometimes when, when you're artist and oftentimes obviously these pet groomers are artists at heart, finances are a little bit more difficult to understand. So if the original Profit first book is not resonating with you, then maybe pick that one up as well, the Profit first for Creatives and see if that one might help you a little bit more as well.
So perhaps, obviously we probably need to, need to do a shout out to the, the founder.
You can just tell us about who, who wrote the book. I can't quite remember his name. Yes. So Mike Michalovich. I've actually got a copy of the book here. Let me show, let me show you this on camera. So that's the book, that's the book we're talking about. Mike Michalovich wrote this. He was, he was a millionaire and he, he built up 2 million pound businesses and he basically managed to lose every single penny because he didn't look after the money in his business. And he came home, you read this in the book, but he came home being told that he was facing foreclosure, I think they call it in America.
And he was going to lose the house, he's going to lose his cars. And his daughter ran upstairs and got her piggy bank down and tipped the coins in front of him and said, you can have my money, daddy. And he broke down in tears. He went through a difficult time for A few months from that point on. But it resonated with him, the money being in the pot and suddenly he started to think about the old fashioned envelope system that our grandparents may or may not have used when everybody was paid cash in those days.
And he started to formulate what he saw, the behavioral aspects of what would make that work and therefore created Profit first. So, so the book came first and then after a while he decided to set up a membership organization where people could be licensed to help people with Profit first, which is where Crystal would have. Would have come across Mike and joined Profit professionals in the U.S. i came across it over here, joined profit first professionals and then like I say, took over the license in this country afterwards.
I do have a free download of the core chapters that people would would be able to get from me if they want that to save them going to Amazon and paying 1718 pounds out for the book. Maybe have the PDF the core chapters first, see if it resonates. If it doesn't, you're saving yourself £1718 on the book. If it does, go ahead and buy the book or download on Audible and they can get that from our website, which I'll give you the details for in a second if you want me to.
Bill. Yeah, definitely. It's definitely going at it with an open mind is just thinking there is, there is a different way and that different way might be suitable for me or might help me, isn't it? So yeah. Where can people actually find a. So it's important. Is it important to find a Profit first accountant or professional so that they understand what you're going on about? I suppose you couldn't just walk into a normal high street accountants or and say that I'd like to run the Profit first system.
Would you? Would they sort of say, I don't know that is. Or I've heard of it, but we don't do that here. It's interesting because we get more and more accountants and bookkeepers coming to us as an organization saying, my clients ask me about Profit first but I don't know what it is. Can you help me? Right, so the awareness is getting out there. Not as fast as we would like, it's fair to say. As you said, Bill, you know, you hadn't heard of it. Maybe people in your group haven't heard of it.
So we need to get awareness out there a bit better. If anyone wants to go on to our. So anyone in the uk, if they want to go onto my website or our website, which is profitfirstuk.co.uk in on there. There's free resources so you can request the five core chapters of Profit first and I can email that over to you. And there's also a find a certified PFP in there so they could click that link for them, some details about their business and then we can put them in contact with someone that can help them.
Obviously, if anyone's in, in the US or outside of UK and Ireland, then Crystal is the person to, to reach out to. I can, I can help out. Yeah. And definitely on the Profit first, you know, website, there's also a kind of Profit first professional as well and I highly recommend that. So right now, right now I'm not as active in, in the group, I'm not an active member of the Profit First Professionals. I was just a former. But I need to change that, don't I? I need to get back on board.
So I do definitely. But yes, it's something. Profit first is something I've been very passionate about and I want to help as many people as possible with that and so definitely. And Bill, I can give you a link so you can post on any of your, your social media if you want to post the link in that for. To find a Profit first professional in the, in the United States as well. Yeah. Do you know off the top of your head or do you need to go and find it?
Let's see. I can get it for you. If you guys want to go ahead and discuss something, I can, I can get it for you here. And one of my questions was if, if someone is looking to go with a profit, Profit First Professional, you say you have the license, does that mean, does an accountant, straight bookkeeper, are they actually done specific training? Are they a licensed Profit first accountant? What reassurance do we have around, you know, signing up with these people? And that's. So a certified Profit first professional has gone from, through an intense training program, has passed exams and understands all the concepts of Profit first and how they can be related into businesses.
They also continue to be a member of our organization, which means they retain the licensing and the branding and they also get ongoing training with us to the point where if they've got a particular client and they're wondering how they can help them, they can jump on a call with us and we will jointly look at the numbers and they don't necessarily share the client name by the way, just just to be clear on that, but we can look at the numbers and help them with the areas that we think if it was our client what we would do, where we would support and the ideas that we would come up with.
So yeah, that there's obviously there are people out there that are accountants. They have read the book that will say to people I can help you with that. And they can, but they won't have the knowledge and the education that Profit First Professionals have got. Because our experience of working with Profit first, our relationship with Mike, we have monthly calls in Mike as license holders, etc. And we understand all of the behavioral aspects behind or so all the psychology bits behind it all which we haven't talked about today because it would be too much, probably too overwhelming.
But all of that aspects of where we do a lot of our learning and focus a lot of our attention to. And that's why we talk about holding our clients hands and being able to guide them through the process. One last thing I want to add is some people want help from a Profit professional but they want to keep their accountant. That's fine, that's not an issue. Yeah. So I just want to be clear on that. We're not, we're not saying you have to ditch your accountant and move to another one.
There are Profit first professionals that can offer accountancy, bookkeeping or coaching only. So, so there's, you know, if anybody is looking to find, find help just, just when you fill the format, just let us know what you're looking for. Because if it's, if there's any coaching then I'll put you in contact with a coach as opposed to an accountant. You know, I can, I can do that and look at the membership and think what, what, what serves people best? So you could learn, you could learn the format and the system and do it yourself.
But actually all your bookkeeping and your accounting wise, it just stays the same. Yes. Yeah. All right, that's interesting. What, what I love about it too is that we as the Profit First Professionals get coaching. Basically it's like split. Part of the training is we get coached on how to do this properly so we get our own set of coaching. That's what makes kind of set this apart a little bit as far as what the common, common questions are. But Bill, I do have, it's profit first professionals.com and you can just go to that.
That's the US profit first professionals.com and there is a link to hire a PfP. And so you just go to that and you'll put in your information and then like, like Tim said, we'll, we'll be in contact with you whether you know who who you can talk to. Excellent.
I was just gonna say one last thing that I didn't mention is anyone who is a Profit first professional, by the way, they have to implement Profit first into their own business. And they have. Because you have to live and breathe it to have the passion. Yeah, it's clear that Crystal does from how she talks about it. I wouldn't even have to ask that question. I can tell by the way she talks about it. Hopefully it's come across from what I've said that I live and breathe it in my business as well and in my personal life.
So it's the key part, because unless you understand and you've derived the joy of the change in the clarity in the numbers and how successful it can help you be, then that's when you can really help your clients and really move them forward. So just wanted to point that out and be clear on that as well. Awesome. And maybe part two will be a Profit first mindset. Yeah, sure. And how to. How to sort that out. Excellent. Well, thank you for your time and I'll make sure these links go up onto the podcast and then go on to the other channels as well.
So if you're in the UK, you can go to profit first uk.co.uk and then if you're in the US or, or anywhere else in the world, by sounds of it, profit first professionals.com so thank you very much. Thank you for your time and thank you guys. Be interested to see what people do whether you get an influx, influx of inquiries. Thanks Bill. Thanks Crystal. I hope you have enjoyed this podcast. Please make sure you give us a like or a review to help people find it. The podcast is sponsored by Low Pay.
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