Why Does Sequence Matter?

There is a reason why sequence matters when it comes to your practice finances. In fact, this is the second core principle of Profit First for Dentists.

The Primacy Effect

First, let's talk about the Primacy Effect, which helps us understand the importance of sequence. The Primacy Effect suggests that we have a cognitive bias toward information presented first. We tend to prioritize the first items on a list and feel satisfaction when we check them off. 

This concept aligns perfectly with the Profit First methodology because the order in which we handle our finances matters greatly. If you've tuned in to previous topics in this series, you've heard me mention GAAP, which stands for Generally Accepted Accounting Principles. GAAP follows this equation:

Sales - Expenses = Profit

Unfortunately, this model places expenses before profit, leaving dentists like you hoping there will be leftover profit at the end. This is exhausting and unsustainable. If you feel like you're always grinding away at the chair, producing and collecting more, only to see your income stagnate, you know exactly what I'm talking about. 

Now that we know sequence matters, why not put Profit First in the equation? Simply flip it to:

Sales - Profit = Expenses

It's that simple. Instead of waiting for leftover profit, set up your business to pay yourself first. While this requires some upfront effort to get your allocation percentages right, you'll still have bills to pay, and your Operating Expense account will be funded. But now, you'll have decided to fund your Profit account first. 

This one shift will put your brain into a state of resourcefulness. Less money in the Operating Expenses account means less spending. It's human behavior.

I work with dentists in achieving this freedom through the Profit First system. If you’re curious to learn more, book a call with me, and visit www.profitfirstdentist.com and tap the 'Free Resources' tab to download the first two chapters of my book for FREE!  

USA:

-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." 

Canada:

-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.