Why Profit First Doesn't Work.mp4

Fri. Jun 7, 2024

0:00 - Emily Benson (Speaker 1)

Okay, tell me if this is you. You're in a boutique or retailer community. You ask a question or you see a question posted that says like, how do I track my finances? What do I do with my accounting for my boutique, my retail business? All the answers tend to be read profit first, read profit first, read profit first. Now, I love profit. Profit first, but it doesn't work for boutique owners and I'm going to tell you why in this video. I'm going to go through exactly why it doesn't work what you can do to change it. And I think whether you've read profit first or you've been intending to read profit first everything in this video is going to help you use it better use it differently and actually I'm to tell you about our system so that you can have a more profitable boutique business. If this is your first time watching me, hi, I'm Emily. I'm a boutique consultant and I help retailers, boutique owners and product sellers make from $500 a month all the way up to $5 million a month. So subscribe to my channel if that sounds like you. Okay, let's get into Profit First. So really quickly, let me talk to you about what Profit First is. Profit First is a book written by Mike Michalowicz. It's a lovely book. It's sold a lot of copies. And essentially what he teaches you is how to take the money that you make in your business and divvy it up by percentages to have savings.

1:34 - Speaker 1

What I think is that his percentages work really well and it still doesn't work for boutiques. But the system of taking your revenue and divvying it up by percentage at the end of the day for the bank account so that you know you always have money, it's incredibly helpful for product sellers, retailers, and boutique owners because we have slow times. We have moments in our business that are naturally going to move slower. So by keeping these accounts and keeping them steady by percentage, on your good months, you'll end up with more savings and on your not so good months, you'll be able to dip into those savings. So I love this system. I just don't agree with kind of how it shakes out when you have a product. Business where you own inventory. Let's talk a little bit more about that. I am so sick of seeing people just give the blanket advice of like read profit first, implement profit first. Like first of all, you're running a business, okay?

2:28 - Speaker 1

The books you read, like profit first, it can be hard to get through.

2:32 - Speaker 1

Now, I don't want this video to be negative about Profit First because I believe in it, I believe in the system, I believe in the ideas, and of course the motivation behind why the author actually wrote this book.

2:44 - Speaker 1

What I found though is that people giving this blanket advice in groups or in communities that they're in with other retailers, that's not an answer, first of all.

2:54 - Speaker 1

And then you're saying to me, Oh my gosh, I need to go read a book and then implement the book. That's a lot of work Especially when you're actively running your business, right? You might have an accountant that can kind of help you with it, but maybe you don't even maybe you're doing a lot of the accounting yourself like I want to just say first and foremost like why it doesn't work is because it's difficult. It's hard. It's hard to read the book. It's hard to implement it. We have a lot of other things going on. So take the shame out of being like, oh, I've been meaning to read it, or it's in my stack, or it's on my Audible, but I read the Audible, but I haven't done, like, oh la la.

3:27 - Speaker 1

It's a lot, okay?

3:29 - Speaker 1

And it's okay if you haven't tried to implement it. It's okay if you haven't. I mean, I'm hoping that because you found this that you've been researching it and you know about it, right? But I also want to tell you, even if you have read it, even if you have implemented it and it is kind of working for your business, there are very specific things with product-based business that the book does not address. Now, side note, there is also a book called Profit First for E-Commerce. I've read that book. I enjoy that book. I think it's written by a really brilliant person. I also think that it's geared a lot towards Amazon sellers and boutique owners, retailers are not necessarily Amazon sellers. So I think that while you can use a lot of that training, I still don't think it accurately represents a business that owns inventory, is selling inventory, and is quickly turning that inventory. That's the difference, right? We in boutique land over here selling our products, we are always having to deal with what's trending, what we can get, what's available for us, how quick it's going to ship, and how quick we're selling it. All of those factors are popping into our head all the time. So to implement an envelope system or the profit first method where you basically break everything out into percentages from your revenue.

5:08 - Speaker 1

not hacked it. I just can't actually do it. If that's you, tell me in the comments below and tell me where you're getting stuck so maybe I can make some more videos around how to get you unstuck from that part. So specifically for an inventory-based business, meaning you are there, you're buying inventory, you're bringing it in to wherever you're storing it and then you're selling and shipping that inventory or maybe you're selling it through a brick-and-mortar storefront or a pop-up. Any of these methods, it's just going to be more difficult for you to implement profit first because the way that that system is set up is such that every two weeks you take your deposits and you pay your bills and you split everything out and you move it to the bank accounts. We're getting deposits every day. Again, we're getting We're getting processed shipping every single day.

5:58 - Speaker 1

It is a lot to manage, so you have to stay on top of everything so much. By and far, though, the absolute biggest issue and why Profit First really doesn't work great for product businesses is because of that inventory, that complicated inventory is not factored into the percentages in Profit First. Now, it is a little bit in the e-commerce side, right? They do have a chapter on inventory.

6:25 - Speaker 1

Again, I just think it's a little different. And I think that as someone who's like, I can either order things six months out or six weeks out or six days out and I'm constantly moving inventory, selling it. When you have the inventory piece of it, trying to implement it with the accounting side of your business is where a lot of people get stuck. So profit first is an accounting system, okay? So it's like after you've sold things, after you've billed out, after you've made money. But with a boutique, with a retailer, we have this other area that's inventory.

7:00 - Speaker 1

Inventory is getting paid for by us and by our customers.

7:04 - Speaker 1

And we're constantly flipping that inventory. Okay, so there's a whole inventory piece before You can deal with profit first that has to be dealt with and that's the bigger piece of it That's where I see so many people mess up and that's why like you can't even implement Profit first because you don't even really have enough juice or money to put into those percentages, right? So this is where you're getting stuck. You are making sales in Shopify on on Etsy, wherever your POS system is, right? You're making sales there. But what we're actually talking about with Profit First is your bank account. So what happens when the money moves from Shopify or Etsy over to your bank account? First of all, there's money that gets taken out in the middle. Where does that go? How much is that? How much is getting taken off in fees and and all the things you have to pay for it like if you have a Shopify capital loan that's getting taken out of it right so even from just making your sales in your POS system all the way then to the money getting to your bank account you've already lost money somewhere somehow and then it's getting to our bank account and we have to worry about sales sales tax.

8:32 - Speaker 1

retail business is incredibly complicated.

8:35 - Speaker 1

And to just give the advice, go read profit first is awful.

8:40 - Speaker 1

It is negligent, honestly. And I think at the end of the day, we all have to come to terms with the idea that profit first is a great system. Separating your money into percentages, basing it on being able to have enough money to pay yourself, pay your taxes, do all that is awesome. But the reality of the way it's playing out in boutique land is not the way that we're seeing it portrayed from profit first testimonials. OK, that is the biggest difference. And maybe this will land on Mike Michalowicz's screen and he'll say, call me up and say, Emily, would you write this for boutiques?

9:12 - Speaker 1

And I would say, yes, absolutely. Let's do it.

9:15 - Speaker 1

Because I genuinely think that we're missing the mark somewhere. There is a disconnect between the sales that you're making and how it's moving down the line to your bank account and ending up being profit.

9:28 - Unidentified Speaker

I just think that we're getting confused somewhere in the middle. So here's what I want to tell you. If you want to make more profit in your boutique business, in your retail business, we can do it. Where is it going to come from, though? Your inventory. It's going to come from your inventory, it's going to come from your margins, your sell through, and your sales. It's not going to come from profit first. Can we float it through profit first at the end? Yes, totally. But we have to deal with your inventory first. And that is what I teach in my courses, in my educational platform. I have an awesome new class called Profit Power. Tools that I think everyone who sells products should take and this is one of the processes that I walk you through. I walk you through how to take your inventory, manage it so you're making a profit on that side and then we're flowing it through your bank account. We're flowing it through QuickBooks or Wave or an accounting software to where you actually do make a profit in your bank account, right? Because that's different. Those two things need to work together. That's what I teach. That's what I'm so excited to teach you. So if you're interested in learning more about how you can make a profit in your boutique business, retail business, product business, please comment profit below and we will send you the link to find out more. We'll also put it here on the screen. And if you want to learn more about how to find profitable products for your business, go ahead and watch this video. It is going to walk you through how to do that. Thanks so much for watching and I'll see you on the next one. Bye.