The Profit First method is appealing and useful for creative business owners who need a straightforward way to track where their money is going, make sure they are charging and spending correctly, and still come out with a profit at the end of it all.
But learning any new system can be difficult, and Profit First can reveal unexpected hiccups in the way you run your interior design business.
Here’s an example of what we mean:
Picture a business owner who is so excited to begin using Profit First for her company. She opens her bank accounts, gets her allocation percentages in order, and is ready to get to work. But over time, things don’t make sense. Her numbers aren’t adding up, and she doesn’t know why.
What was a simple and freeing system is suddenly overwhelming and complicated.
So what happened here? Did Profit First break down as a system? Is it user error?
Actually, it’s not quite either of those issues.
Profit First is powerful because of the way that it breaks down a business’s incoming cash. Rather than keeping all of your money in one bank account, you’re routinely separating all the different parts (materials and subcontractor payments, operating expenses, sales taxes, and more) into specific accounts. When you are forced to slow down and see every dollar your company brings in, distributed into the appropriate bank accounts, it’s much easier to spot inconsistencies and find areas where the math isn’t adding up.
This isn’t an uncommon experience for interior design business owners starting out with Profit First. The truth that these challenges reveal is that there could be other issues in your business. One of the advantages of implementing Profit First is that – other than segregating money for specific purposes – the process will start to shine a light on areas that need improvement. Whether it’s your pricing structure, the way you’re calculating sales tax or the way you’re paying your subcontractors, there are so many factors that could throw your allocations off.
Even though troubleshooting these problems can be stressful, the good news is that you found the problems in the first place! In a different scenario, you would never even know that those problems existed, and you would be losing money because of it.
So if you’re wanting to revamp your system or begin using Profit First for your interior design accounting, we say go for it. It may take some heavy lifting to identify and solve problems at the beginning, but the payoff is so worth it.
If you’re stuck trying to implement Profit First and need a helping hand, we’re here to help!