With Profit First for Dentists once you commit to the Self-Assessment and take the action to complete it, you are also opening yourself to the truth of your financial situation. Are you ready?
This assessment is going to help you see how much cash came into your business and how much cash went out for a certain time period, typically the prior calendar year.
The first step is to gather all the data you will need to complete the assessment. This is an important step because if you just dive into the assessment and have to keep stopping to gather data, you’re going to get frustrated and give up. Besides it will take a lot longer to accomplish the task. So, do take the time now to gather the data.
Here’s what you’ll need to gather:
Profit and Loss statement for the Previous Calendar Year
Balance Sheet for that same time period
Tax returns for the same year
Payroll reports for the same year
All business loan statements for the same...
Once all five of your Profit First bank accounts are set up, it’s time to figure out the allocation percentages so you can begin to transfer funds each week. The actual transfer of funds from the income account to the other four accounts is where you will see the magic happen. I can’t wait for you to get started!
So how in the world do you know what percentage to use for each account? Great question!! And I know you’re wondering how you’ll have enough in the Operating Expense account to pay all the bills and not run short – especially if you’re feeling like things are really out of whack with your finances.
I want you to first promise you’re going to stick with it once you go to all the work to do the self-assessment. Please make this promise to yourself. If you don’t write it down and really make the promise to yourself and things get tough – you’ll be so tempted to quit. ...
If you’ve been following my blog posts, I’ve been writing about the core principles of Profit First for Dentists and now I’m shifting my focus to the Self Assessment and how to put all of this together to make it work.
One of the first questions many dentists have is, “Why do I need the 5 Bank Accounts? Can’t I just do this on a spreadsheet?” Great question! And I’m glad you asked.
The truth is that I have all my students begin with just one extra account called Profit. This one little behavior changes everything. You see Profit First is a behavioral system. The beautiful thing about this is that it capitalizes on our natural human behaviors around money.
If we can use the current behavior to make a positive difference in cash flow, well Yes, let’s do it! Seems like a no-brainer to me.
Funding the Profit Account every week begins the habit of Profit First but it’s not the...
Being self-employed is the best thing on some days and the worst on others. There are many days when it seems like the work never ends. There are days when you wonder if you’ll ever find the Freedom you set out to have by owning your own business.
Finding that Freedom means you set your business up to work for you – not you always working for it. This means you know your numbers because you have a simple system in place. This means you know your profit and you know how to make decisions based on profitability not just production.
So how does this happen? Glad you asked.
Using the Core Principles of Profit First for Dentists, let me review the overall system. If you need a refresher on these core principles, go back in my blog posts where you’ll find a blog post for each one. Or better yet, grab a copy of my book where you can learn all the details.
Remember all the money flows into the Income Account each...
This is the last blog post in this series of 5 about the Principles of the Profit First for Dentists method. The final principle is to Enforce a Rhythm.
I hear from dentists pretty consistently they feel like the cash flow is a roller coaster. One month it’s up and the next it’s down. This causes a struggle when paying all the bills and meeting payroll demands.
Instead of playing catch-up or going into panic mode when all the bills are due, it’s best to establish a weekly rhythm and flow to the cash coming in and out of the business. Creating consistent cash flow week in and week out removes the panic button and replaces it with peace of mind.
This weekly rhythm allows you to allocate by percentage and transfer money each week thus funding all the accounts in the correct amount. Weeks that have a higher dollar amount in collections will serve to build up reserves in each account and then on the weeks when collection is...
I’ve been sharing information about the Core Principles of Profit First for several weeks now. Today the topic I'm sharing about is the principle called, Remove Temptation.
Once an entrepreneur begins to fund the Profit Account and the Tax Account, money will begin to accumulate. Over time as this cash grows, it might be tempting to want to use it all and plow it back into the business. Please don’t do this!
This action of plowing back into the business all your profits will actually cause the overhead to go way up and it totally defeats the purpose of the Profit First method. If you find yourself tempted to use the money in the Profit Account or the Tax Account when the Operating Expense Account gets a bit low, then determine straight up that having the No Temptation Accounts will be your friend.
The No Temptation accounts are established at a bank across town. The No Temptation Accounts hold the money in the Profit and Tax...
Today I’m sharing about the principle of Sequence and why it matters. It’s the second Core principle of Profit First for Dentists.
First let’s talk about the Primacy Effect to help us understand why sequence is so important. The Primacy Effect tells us we have a cognitive bias toward information presented first rather than later. We do the same thing with items on a list. If you’re a list maker, you’ll understand. The things at the top of the list get done first and you delight in checking them off. This is great news for Profit First. The sequence of how we do things does matter even when it comes to your money.
If you’ve listened to my previous topics in this series, you’ve heard me talk about GAAP which stands for generally accepted accounting principles. The basic equation for GAAP is Sales – Expenses = Profit. This has caused entrepreneurs including dentists like you to...
Today my focus is on Principle number one called The Small Plates Principle.
First I want to share a bit of background information so all this will make more sense. Going all the way back to the early 1900’s we find the GAAP formula. Now GAAP stands for Generally Accepted Accounting Principles and the basic formula for this structure is Sales – Expenses = Profit. This means we sell our product or service, then we pay all the bills and whatever is leftover at the end of the month, quarter, or year, we get to keep.
I’m here to tell you there is a better way for entrepreneurs to run their business. All you need to do is flip the equation to Sales – Profit = Expenses. This is the Pay Yourself First model. It’s the Profit First way! But exactly how is this going to work? This is why there are principles associated with the model. To explain how this first principle called Small Plates works, I...
Maybe you're wondering, "How do I implement Profit First?
What do I need to know?"
This week starts a new series where I'll cover each of the core principles of the Profit First for Dentists method over a 5 week period.
Today I'm giving you the basics and then in the coming weeks, we'll dive in to each of the 4 core principles and I'll explain how it all works. It's quite simple - really.
Here's an overview to get started.
How would you answer the question, “Why isn’t my dental practice profitable enough?”
This week, I sat down with Michael Arias of The Dental Marketer to discuss my Profit First model for building profitability in your practice.
We talked through some of the key concepts of the model and other good business practices such as:
You need to operate under a new formula of Sales - Profits = Expenses, instead of Sales - Expenses = Profits. This new way of doing business will challenge you because you have to totally rethink how you’re doing business. The challenge will be worth it in the end. You’ll...