Profit First: The First 90 Days

We lay out a practical 90-day plan to implement Profit First in a therapy practice, starting with bank accounts, allocations, and simple weekly habits. We also explain how to create instant financial clarity, cut overspending, and build toward quarterly profit distributions that actually reward you.

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*Intro/outro song credit:
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Transcript

The 90-Day Profit First Plan

SPEAKER_00 0:00

If you're thinking of implementing profit first into your practice, I'm going to walk you through exactly what to do in that first 90 days. My name is Craig, and I'm the owner of Daisy Financial Coaching. Our team is on a mission to make your therapy practice permanently profitable. If you own a solo or group practice, we're here to help you build a business that creates more time, makes more money, and serves more people. This is the Therapy Business Podcast. Profit First is a best-selling book by author Mike Mikalowitz that is designed to take finances, accounting, turn it on its head, and make it something that's simple and easy to understand and implement. If you've been listening to the show for a while, you know that this is the bread and butter of what we do. And so we help practice owners in a lot of ways with their business, but the blueprint and foundation revolves around having profit first set up in your practice. This creates the money, the clarity needed in order to make decisions in the practice, to scale and grow in a healthy financial way. So Profit First is essential. Now, if you're not familiar with it, or maybe you've heard me reference it here and there, but you're just not super in tune with what it is, then I want to point you in a few directions. So, first of all, you can always get the original book, Profit First, by Mike Mikalowitz, which I will link in the show notes below. Along with the rest of these recommendations I'm going to make, there will be links that you can find. So that is the first step. However, there are what are called profit first derivatives. These are books that certified Profit First professionals have written for specific industries. And there is one if you're in the mental health space, there is a book for therapists, Profit First for Therapists, and that's by Julie Harris. And it's a great, great read. I highly recommend it if you own a mental health uh practice. And so I'll link that below as well. I am currently writing Profit First for Physical Therapists. And so while it's not out yet, uh as of this recording, I'll add a link to it in the description whenever we have either pre-orders up or the book is launched. So if you're listening to this not on release, then there's a chance it's already out and you can go grab it. If not, then I do recommend, I don't recommend waiting. So don't say you will all wait to do profit first for another however long until that book's out. No, go get Julie's book, go get Mike's book, get started on learning the process and getting it implemented. So there are those resources out there. You can always go to we have episode number two in the podcast, is spent really describing and digging into profit first. Now I'm going to give you a two-minute snapshot into how the system works before we get into this first 90-day piece. And so that way you can say, okay, A, maybe you've heard of it, you read the book, but you're you're still a little fuzzy on the details. B, maybe you've never heard of it. And this insight will give you the opportunity to then say, okay, here's what it looks like in those first 90 days. So profit first is a money management system that is leveraging your behavior. Traditional accounting is all about, you know, if you were to pull your profit loss statement or income statement, you're gonna see at the top is sales. You're gonna see expenses are in the middle, so those are subtracted from the sales. So sales minus expenses, and then at the very bottom, the bottom line is profit. That's why it's called the bottom line. So sales minus expenses equals profit. Profit first is saying if profit is so important, then we should prioritize it. What we prioritize first happens first. I dug into some of this behavioral piece in a recent episode as well. Uh, go look at that. It's called why bookkeeping alone can't run a therapy practice. So go listen to that. It's gonna get into all the behavior behind why this system works. So turning that upside down, we are now gonna leverage our behavior and we're gonna use what we call bank balance accounting. This is like the money envelope system for your business. Using multiple checking accounts, you can keep a pulse on where your business stands. You'll have a checking account for profit, you'll have one for owner's pay, you'll have one for taxes, you'll have one for payroll, and you'll have one for your operating expenses. So setting these up is going to give you clarity at any moment. You could pick up your phone and you could just say, Okay, how am I doing in how much money do we have in operating expenses? How much money do we have in uh payroll so that we can run payroll? And do we have enough to run payroll here in a couple days? That's what it's all about is giving you that instant snapshot clarity that you know the accounting spreadsheets won't provide. Now, bookkeeping and accounting is incredibly important. You'll always hear me say that. Don't go fire your bookkeeper and say, I'm gonna start using bank accounts to track my spending. You need to have good records, but records alone are not gonna help you in making money decisions in the f on the fly. It's gonna help make sure that you have money set aside for the important things, that you're running your business as efficiently as possible, that you're making sure you are paid a paycheck regularly, on time, the same amount each time, and that you're taking a bonus every quarter from the profit account. That's the beauty of the system. Now, profit verse is all about habits, and so that's what we're going to be breaking down today in that first 90 days is establishing some of these habits and then leaning into that. And what you know, if you've read the book Atomic Habits by James Clear, he calls it habit stacking, taking things we're already doing and then just anchoring some of these things to it. So I'm in the habit every day of when I wake up, I put on a pot of coffee, or every Thursday evening I roll the trash cans to the curb for trash pickup. Those are habits I already have. So if I want to be successful, I can anchor or stack habits on top of that, being maybe I want to read more. So my new habit might be when I put on a pot of coffee, I sit down and read a page or two of a book. So you can see I take a habit that's already in place and I'm gonna stack on top of it. So when building new habits, that is a way to implement it. And when we talk about some of these rhythms we're gonna get into here in this episode, that is something you can do is what am I already doing that maybe I could anchor onto and just say, okay, when I do this, then I'm gonna go ahead and also do this new habit with profit first. All right, so there's the breakdown of profit first. When you are have decided you're ready to start. And so again, maybe you just heard what I said and you're like, love it. I don't even care. I don't don't even need to hear more. That's exactly what I've been looking for is that instant clarity. Then day one, this is the first thing you'll do, whether if you've read the book or not, um, day one is you're gonna set up your bank accounts. And so if you haven't set up your checking accounts yet, those of you who are fans of Profit First and are ready to implement this, day one is opening those accounts. So whether you need to go into the bank, uh, you can hop online if you and if it lets you open up checking accounts in your online bank. We are looking for free checking accounts, ideally. You don't wanna, we don't want ones that are gonna make you jump through hoops or have a$500 minimum in each account or have an automatic transfer, you know, every once a week, or whatever those rules are to keep it free. We are looking for something someplace that offers legitimately free checking accounts. So this could be a credit union. Uh Relay Financial is an online business uh platform that does banking. So I use them for my business and they actually partner really well. They're they're uh affiliated partners with Profit First. So when you go in there, it's set up to seamlessly do the Profit First system. Uh so you can open those easily online. So I recommend if you're not happy with your bank or they don't have free accounts, or it's not easy, and you're wanting to make a change, that's always a good option. I'll link that in the description below as well. Now you're gonna open up checking accounts. Now we I'm gonna recommend six checking accounts is what you'll need. So you're gonna I'll go through them again. We'll need one for income. This is where deposits go. You're gonna need one for profit, owner's pay, taxes, you're gonna need one for payroll and operating expenses. When those accounts are open, we're gonna get online and we're gonna nickname each account. So one of them we're gonna nickname it. So when you open up your your phone, you'll actually see the words income, not checking account 6542 or whatever that is. So it actually says income or profit or owner's pay. We're gonna set all of these things up, and then we're gonna set up what percentage is gonna go to each of these accounts. This is really important, and this is where we're not gonna dig into how to come up with your percentages uh right now, but knowing your starting percentages for how much you should be allocating to the profit bank account, how much should be going into that owner's pay account, that's really important, and that's where reading or listening to one of the books will give you valuable, valuable insight. Uh, you can also always schedule a call with one of our coaches because this is what we specialize in. Uh, if you decide to join our coaching program, we do all this number crunching for you. We figure out your best percentages, but either way, taking action to figure out what your percentages are is really, really important. And then we're gonna make that first allocation. Now, what that looks like is taking money and we're gonna move from the income account to each different bank account. We're gonna move a certain percentage to profit, certain percentage to owner's pay, to taxes, etc. Now, going back to your accounts, because we've opened these accounts, you're going to want to change where money gets deposited and where money gets pulled. We recommend if you take insurance, then whatever your current checking account is, if you're staying at your current bank, let's switch that to the income account so that you don't have to deal with trying to change the accounts with your insurance because we all know that's a pain. Uh, and then you'll just change the other ones. You'll pick whatever account is operating expenses, that's where all expenses would be withdrawn from. Payroll will be connected to your payroll software. All right. So, once again, not going to get into the weeds of this. If all this sounds enticing or you're going, Craig, this is a little confusing. I'm kind of breezing through the actual challenging part of setting up the accounts themselves. Uh, that's a conversation again. If you want to chat with one of our coaches, we're happy to help uh or check out one of the books. We're just gonna walk you step by step through how to make those changes, what to do, how to do it. All right. So we're gonna move money on day one. Week one, once day one is through, then on the first week, uh, we're gonna spend some time trying to cut expenses. Depending on where your business is, 99% of the time when I see a practice or meet with a practice, they're overspending, and we need to find ways to reduce that ex those expenses. So going through your expenses, seeing how we can cut back on spending, maybe some variable expenses, uh, maybe subscriptions you're not utilizing, or just places where you're overspending or money slipping through the cracks. We're gonna try and find that and cut five to 10% if possible. So, really looking deep. If you're saying I've already cut expenses, I've cut as much as I can, I recommend going in at it again with a different lens, just see what else can we cut, even if it's just temporary. What if we could pull back on X, Y, and Z until we get through the next 90 days, and then maybe we can reintroduce that expense back in if the budget allows. Okay, during week one, we're going to share the system with your accountant or bookkeeper. So if you haven't already, tell them what you're doing, send them a copy of the book, say, here's what I want to do, here's the system I'm implementing, and be ready for them to have probably questions if they haven't heard of the system before. But sometimes they might have some pushback, and that's because a bookkeeper will hear, you want how many bank accounts? And that's gonna require me to reconcile all of them. They're gonna hear that's a lot more work for me. And so guiding them through, yes, it's gonna show bank-to-bank transfers, but ultimately all the expenses, all the deposits are still coming into one account, all the expenses are coming out of out of one. So it really time-wise, once they get a grasp of how it's all working, it's not a huge undertaking. My bookkeeper, whenever I decided to implement it, um, was weary, and they've even said that it's really not a big deal. And so it's it's very minimal, if any, extra work. Some bookkeeper, you know, most profit first professionals are bookkeepers and accountants because they're huge fans of it, and they say it makes it easier in a sense, because it is all in these buckets in one place, and so they have more clarity when they're trying to organize things and put them in places. So uh I highly recommend talking to your bookkeeper and accountant, remembering that you they work for you, right? So you don't need their permission. Uh, if you are wanting to implement profit first, if you've read the book and you're like, I want to do this, it's I need this in my business, don't let them tell you no. Okay. So uh I want them to be on board, and I'm not saying, you know, you need to be a jerk about it, but it's you this at the end of the day is your business. And if they're going to refuse, which we rarely see somebody refuse, but if they just put their foot down and say, you know, I'm not gonna do this, or they try and double your rate, then it might be time to find a bookkeeper who's more open-minded to it. And so just bear that in mind that you're trying to bring them on board and you can educate them on it, you can send them a copy of the book. But at the end of the day, um, this is important. I I'm a firm believer that this is such an important piece, and I would hate to see you just have to say, Well, I can't do profit first because my bookkeeper said they don't want to do it. Um, for that to be the reason to caught that's gonna cost you a lot of money. So I really recommend uh, and again, most of the time they're gonna be on board, especially when they learn about it. Uh, they might be weary at first, but once they get into the swing of it, they're gonna realize that it's it's not a huge deal. All right. Uh, that's what we're gonna be doing week one. Now, I want to talk about allocation rhythms. This is how often you move money through the banks because I recommend weekly. Now, in Mike's book, Profit First, he talks about the 10th and 25th for therapy practices, uh, physical therapists. I highly recommend doing it weekly. Um, I know a lot of times with insurance being delayed and billing and all those things, having money flow in more regularly, like once a week, is going to be beneficial. Uh now picking the day of the week is totally up to you. Some people like to do it when you know the the day that payroll would normally run. Uh, some like to do it on the day maybe one of your larger insurance providers deposits uh on Friday or Thursday or whatever it is. So maybe you're like, okay, I want to wait, and that'll be my day of the week is after that deposit is made. Decide. And this is where that habit anchoring comes in, and it's choose what am I gonna do? So for me, it's Fridays, and I know every Friday morning it's I sit down and I manage the money. I go in, I make sure the money is allocated to each account. I go and if there's any outstanding invoices I haven't paid, I make sure they're paid. Uh, if I've accrued any, you know, charged anything to the credit card that week, I'm gonna pay it off and pay it back down to zero. I'm gonna take care of all of the expenses, all the money management same day. And usually it's 30 minutes or so once a week that I sit down and do all those things. So pick a day of the week and do that. If you want to do bi-weekly, that's okay too. Just it just depends on you. Some people just won't want to do it when they run payroll. Um, I personally just think weekly is easier to remember. But again, if you're anchoring it to if you run payroll bi-weekly and you're just gonna do it the same day that you would be submitting payroll, then that's that's habit stacking. You're stacking that habit on top of something that you're already doing, and so you're more likely to be successful. Okay. Allocation rhythms are gonna be key. It's getting into that, and this is for the life of our business. Once a week, once every other week, we are moving money through the accounts. I don't recommend doing it super frequently, so don't I wouldn't do it daily. Uh, maybe in the first month or two, you might need to do some every couple days just to get money into the accounts, but eventually we want to move to a once-a-week rhythm. All right, then the last rhythm we're gonna be talking about is the quarterly rhythm. So this is every 90 days. So at the end of the first 90 days, uh, you will be taking a profit distribution. So this is taking what's in the profit account, and half of it's gonna get paid out to you as a bonus. So this is money for you to use on whatever you want. It's to be celebrated for a profitable business, profitable practice, profitable quarter. The other half stays in the business as a cash reserve or retained earnings. So this is an emergency fund. This could be for growth. This could be if you're saving for a new building or a new employee or whatever it is, building that cash reserve. So having some kind of emergency fund and then maybe saving for the next step of growth, but making sure that at least half of it's coming home to you as a profit bonus. You can also use this money to pay down debt. So using this to uh get ahead of the game on that. But the bonus that you're taking home can be used on anything you want. I mean, it could be a nice dinner, it could be uh if you are focused on wanting to build up your retirement savings, you could go put it into the market however you want to use it. But the key is that you don't reinvest it in the business, it's for you to celebrate. And I recommend doing this at the end of the fiscal quarter. So that means you know, March, end of March, end of June, end of September, end of December. So taking your profit distribution. If you are starting this system and it's March 10th, well then at the end of this month, uh you would take a distribution. So at the end of March, I don't care if it's 20 bucks is in the profit account, take half of it, take that 10 bucks, and go get yourself just like the most premium coffee you could possibly get and just enjoy it and celebrate that you are prioritizing profitability. Quarterly, you're also gonna pay any tax estimates. So if you if you do tax estimates on a quarterly basis, you're gonna take care of those. Um, you're gonna adjust percentages. So if you are taking your current percentages that you're allocating to each account, so what you're allocating to profit and owner's pay and operating expenses, we're gonna make adjustments if needed. So, again, if you're brand new to the system, you're most likely going to need to make adjustments. Typically, we see that practice owners are not paying themselves enough. And so, what we're slowly doing is we're taking operating expense percentage, maybe it's sitting at 50%, and we're moving percentage points over to owner's pay. So maybe we drop it from 50 down to 47 and we take 3% and we start putting 3% more into that owner's pay account so that you can start paying yourself more. So every quarter we'll make that slight adjustment to the percentages until we get you to a healthy, balanced place. All of that, what we would call the target percentages, they're in the book. Uh, we also have a quiz on our website, quiz. Uh, I'll I'll link it. It's just quiz.craigdacy.com. If you go there, it's gonna ask you a few questions and then it'll send you a custom report that says here's what percentages you should be aiming for in your business. All right, so we're gonna make those adjustments and then quarterly. I always recommend doing an expense analysis. This is not another time where you're gonna try and cut five to ten percent. This is let's look at our expenses, let's see if there are cheaper alternatives out there, is there anything we can cut that we're not using right now? Um, is there anything that is yeah, whether it's a cheaper alternative, or maybe you can call and see if you can get a better rate. We're just going to spend a little bit of time once a quarter looking at our numbers and seeing can we be more efficient? Are there better options out there? You know, we an example I use a lot is the payroll software I was using for a long time. I when I did this one quarter, I went to the website and I saw that they had added a brand new tier of, you know, you have the pricing tiers, and I was on one of the middle ones or higher ones, and they had added one just below it that had everything I needed. So the one I was on had some extra stuff that I wasn't utilizing that I didn't need, and the one right below it was everything I was currently using and needed, and it was about half the price. So all I had to do was click change plan, downgraded it, and I saved it, wasn't a ton, maybe 30 bucks a month, but all those little things can add up, and we're not gonna know unless we look. You're not gonna know if there's a cheaper internet provider or if there's a better rate with your current provider. They're not gonna call you and say, Hey Craig, guess what? Uh, I'd love to tell you that you can pay us less money for the same service. They're not gonna do that. So you have to call them. We got to be proactive to find those opportunities. All right, there's your first 90 days of Profit First. Again, if you are not familiar with Profit First yet, you're probably like, that was overwhelming. So for you, uh, we talked about day one. I'm gonna say day zero today. Get to know Profit First, go get the book, start listening to it. Um, again, all links will be in the description below so you can learn this process. And then from there, take you can listen to this episode again, but it's gonna walk you through that first 90 days so that you can be successful in setting this up. This is essential to your business. I promise you, if you lean in and implement this the right way, it's gonna completely change everything and you're gonna look back as this being a pivotal moment in your practice and the financial health of it and how it scales and how it grows, and just the peace of mind and clarity you have around your finances. Thanks for joining us on the Therapy Business Podcast. Be sure to subscribe, leave a review, and share it with a practice owner that you may know if your practice needs help getting organized with finances or just growing your practice, head to therapybusinesspod.com to learn how we can help.