Business owners must be aware of the difference between sales and profit. Putting profit first in your business will set your business up for success. Sales are important, and without sales, you can’t have profit, but high sales numbers mean nothing without profit. Profit is what you get to keep at the end of the day, after taxes, and you can use profit in various ways, depending on your financial goals.
How to achieve profit first in your business
The profit formula is:
revenue – expenses = profit before taxes
Always remember to put money aside to pay your taxes each month into a separate taxes payable account, so you don’t confuse that with your cash levels. It’s vital to keep money aside to avoid a surprise tax bill. Ask your tax accountant what tax average percentage you should be used to roughly calculate your taxes owed.
And remember, paying taxes is a good thing because it means you’ve made a profit. You always want to keep profit first as a priority in your business.
The importance of putting profit first
As mentioned, profit is an essential part of the business. When you follow my Cash Confident Framework™, you will learn how to create a solid financial foundation in your business and increase profit.
If you want to start putting profit first in your business, check out the free Path to Profitability masterclass which teaches you how to create a profitable business through good financial management. It’s easier than you think!
When you put profit first in your business and create profit, you will eliminate the feast or famine cycle many entrepreneurs and business owners are in. You will have money to reinvest into your business to grow, or you will be able to pay yourself extra bonuses and dividends. You should always check with your tax accountant to help you find the most tax savings strategies for your situation.
How the profit can be used
The profit helps you grow your business debt free. When you create profit in your business, you can choose to grow your business using a business financial plan, or you can pursue bigger projects for your business. You have options when you have money to work with.
Profit increases your cash balances and provides financial stability and security for your business. You can build up your cash reserves with the extra cash you have, but once those reserves are built and maintained, you can start looking at other ways to invest your profit.
Investing your profit to get your money working for you is a smart, financially savvy move. Most millionaires have various streams of income coming in because it is smart to diversify income streams and mitigate the risk of your income streams drying up.
Why you need to put profit first now in your business
If you are a business that wants to grow and scale without accumulating additional debt when you create profit in your business, you can self-fund the growth of your business. Financially stable and successful businesses create more opportunities to create more money in their business.
You can grow your business through expansion or taking on new projects that will create passive income. It’s smart to get your money working for you and create more money.
Knowing how to get rich is a strategy that most people want to know, so be sure to invest the time to educate yourself and learn the money secrets that the rich already know. Knowledge is power, and when you learn how to manage your business and personal finances well, then you will create wealth in your life.
Remember, it’s not how much money you make that makes you wealthy; it’s how you manage it.
Want to learn more about building a solid financial foundation in your business? Register for the free Path to Profitability masterclass to get you on your way today!
