What Do I Need to Know to Implement Profit First in my Practice?
Jun 03, 2024
In the Profit First system, there are four core principles. In this blog, I'll give you a brief introduction to each, and over the next few weeks, I'll dive deeper into each one.
The First Principle: Small Plates
Since the early 1900s, the average dinner plate has grown from about 8 inches in diameter to roughly 12 inches. Compare the amount of food on an 8-inch plate to that on a 12-inch one. If we want to eat less, we use a smaller plate. Now, let's translate this concept to your bank account. By using multiple bank accounts and allocating funds across them, each account has less money available for a specific purpose. Research shows that when less cash is readily accessible, we spend less.
The Second Principle: Serve Sequentially
Order matters. Just as eating healthy foods first satisfies our appetite and reduces the craving for less nutritious options, the sequence of allocating money to various accounts is crucial. Make sure to take your Profit First, followed by your Owner's Compensation and Tax accounts. Once these vital accounts are funded, allocate the remaining funds to your Operating Expenses.
The Third Principle: Remove Temptation
If I know there's ice cream in the house, I'll probably eat it. If I don't buy it in the first place, I'm unlikely to go out of my way to get some. The same principle applies to accumulating money in your Profit and Tax accounts. To minimize the temptation to spend, move these funds to another bank where access is limited.
The Fourth Principle: Establish and Enforce a Rhythm
Maintaining a consistent eating schedule helps prevent overindulging. If you wait until you're starving, you'll likely binge or grab whatever's convenient. The same concept applies to managing your money. Set a regular interval for transferring funds from your Income account to your other bank accounts. In a dental practice, I've found that a weekly interval works best.
This is only a brief introduction to the four Profit First Core Principles. You can also find more information in my book, Profit First for Dentists, available on Amazon, Kindle, and Audible.
Ready to take control of your practice finances? Visit www.profitfirstdentist.com and tap the 'Free Resources' tab to download the first two chapters of my book for FREE! These resources are designed to support you in managing your finances effectively.
-Barb Stackhouse, RDH, M.ED.
Mastery Profit First Professional
"I’m Barb Stackhouse, author of Profit First for Dentists. You might recognize me as the professional behind the Profit First approach for dental practices. I’m passionate about helping dentists implement this effective cash flow system, which is why I wrote the book. My goal is for more dentists to read it and integrate this system into their practices because it genuinely works."
-April Stroink, BComm, RHU, EPC, PFP
Advanced Profit First Professional
With over 25 years of financial expertise, April Stroink helps in transforming the financial health of dental practices across Canada. As an experienced Profit First coach, April is committed to helping you increase your profits, optimize your cash flow, and achieve financial peace. She believes that your business should enrich your life—enabling you to create the life and business of your dreams without compromise.
