“If you aren’t profitable enough, the natural assumption is you haven’t grown fast enough.”
This quote from the book, Profit First, says so much. It’s the old way of thinking. It’s the old formula. Just SELL more. Pay the bills. Keep what is left. Problem is there’s not enough left. Yet, we remain loyal to the old formula.
My husband (a contractor) has a funny saying. “Lose a little on every job, and make it up in volume.” Sounds ludicrous but guess what? I see dentists doing this. When you have no idea of your true profitability or what services you provide that are profitable, or what plans you are on that pay enough to cover your actual costs…well, that’s a problem.
The solution is quite simple. Take your Profit First.
When you decide to do this and stick to it, you will be forced to look at your overhead expenses in a new way. By setting aside your profit first, there will be less in the account to pay all the bills. It’s been proven when money is left in the account, it will be spent. When you move it or transfer it to another account designed for a specific purpose and you are committed to that purpose (profit), you will see a change.
This will be a challenge because you first have to totally change the way you think about business. You’ll need to be resourceful. You’ll need to be honest with yourself. You’ll need to stop doing things the same way and now do them differently.
The new formula is SALES – PROFIT = EXPENSES
More sales doesn’t mean more profit unless you have a system in place to ensure it.