• James Walton

Pay Yourself First

I've worked with several business owners over the past several years who had adopted a "coffee can" approach to financial planning.

As in, shake the coffee can at the end of the year. If there's anything leftover at the end, then that's what we've made.

My recommendation to them was to keep the coffee can, but switch the timing.

Rather than waiting till the end of the year (or quarter, or month) to see if there's anything leftover, designate the coffee can as your profit account. And every time revenue dollars come into your account, automatically move a percentage of them to your profit jar.

Pay yourself first.

Start, even if it's 1%.

Aim for at least 10%.

Aspire to 30% or more.

But start where you are, not where you'd like to be.

Businesses exist to generate free cash flow. Periods of high growth may require plowing back all extra cash into the business, but this is the exception, not the rule.

By taking profits first, you create a forcing function where that which is most essential is assured to happen.

Pay yourself first.

For those interested in going deeper on this idea, check out this slide deck that summarizes Mike Machalowicz's work on the subject.



 

At Trellis Group, we believe chaos is the enemy of business. It's our mission to partner with business owners and their teams to develop the managerial practices and processes to crush chaos. If you feel overwhelmed and need a proven system to focus on the next best thing, we can help. Companies who work with us see revenues go up, anxiety go down, and work becomes a force multiplier for good in the lives of your people. Reach out to discover how the Trellis Group can help you crush chaos.

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