Profit First Book by Mike Michalowicz- Experience?
Good afternoon,
I've been reading Profit First by Mike Michalowicz and am going to set up the system just like the book tells you to do. I was wondering if anyone of you have tried this and how has it treated you? How was the set up process for you? I know it will definitely help my business finances.
Look forward to hearing from a few people hopefully.
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#2 Tax, SDIRAs & Cost Segregation Contributor
- CPA, CFP®, PFS
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Originally posted by @Carson Fox:
Good afternoon,
I've been reading Profit First by Mike Michalowicz and am going to set up the system just like the book tells you to do. I was wondering if anyone of you have tried this and how has it treated you? How was the set up process for you? I know it will definitely help my business finances.
Look forward to hearing from a few people hopefully.
Yes, I have read it and know people who have benefited from it.
I personally think it is helpful for a person that is having trouble tracking their finances.
If you are good at your numbers and are setting aside tax and making regular estimated payments, you should be good.
And also, if comes down to discipline, he is trying to make it difficult for you to access money if you ever wanted to spend it. If you are disciplined, you really don’t have to follow that.
Other than that, everything he says should be done by your bookkeeper, if you are not at that’s Level to have a bookkeeper, following what he says will helps.
Good luck.
Thank you for your comment.
Where I am struggling, is I have two business accounts that have to have a minimum of $500 or there are penalties. One is a checking account that I make all deposits into and pay bills with. The other account I put only tax money into. I also have two personal accounts, one checking and one saving. In order to implement this into my business since I do this full time, should I do the following?
- (REAL REVENUE) Open a new business account where all the checks go into. but... this account if done like the book, will be zero after distributing to other accounts and i'll get a fee for not having more than $500...
- (OPERATING EXPENSES) Use current business checking account to pull all expenses from. Don't allow it to go below $500
- (TAX) Leave business tax account active and continue to put tax money into it and never let it go below $500.
- (PROFIT) use my existing personal savings account to deposit into
- (OWNERS PAY) open new personal checking account which I'll deposit this money into to do whatever I want to do with. Is this 50% like the book illustrates, supposed to be used to pay for personal bills or just personal wants like a new bike or some clothes I may like? If it is supposed to be used for personal bills then I guess i'll use the 6th account which is below?
- 6th account? (PERSONAL EXPENSES) use current checking account to pay personal bills and keep separate from business bills?
Im confused because I of course have both personal and business expenses. Are personal expenses suppose to come out of the 50% owner's pay?
I tithe 10% gross and always pay this first so I'll actually have 40% owner's pay after doing this correct?
Any feedback would be wonderful. Also, I've been saving 25% of every sale for taxes. Is this about correct, too little or unnecessary high?
Also,
Do I need to create another business account for reimbursement checks when I get earnest money back from a property I wholesaled? Where would this money ultimately go back into? The OPERATING EXPENSE account to pay for marketing expenses and so forth?
Hello Carson,
Out of curiosity, have you looked into a free basic business checking account that has no fees, or minimums before setting up the processes described in the book? I noticed you're in SC so I looked for a couple of banks in your area that may suit your needs. Try looking at Ameris Bank business checking and First Citizens bank.
Also, let me know if those aren't close-by or in your area. There are ways to offset some of the banks fees and free up most of the 500.00 in your account. That's costly, especially if you're planning on having 2-3 accounts that's 1500.00 that's dead in your accounts. Put it work for you.
Best Regards,
De'Andre Williams
-
Real Estate Agent Louisiana (#995704723)
- 985-647-4479
- https://clint-galliano.kw.com
- [email protected]
I finally figured out my strategy for everything. Thank you everyone for your input.
Hello,
I just started reading this book and feel like it may be the strategy we need to finally get ahead. Man, it is expensive to be successful, that's for sure.
I'm curious how it's been going for you @Carson Fox over the past few months, what you like about it or don't, if it's still working, or if you gave up on it and why. If you don't mind an update, I would appreciate it!
Thanks!
It has been going great and I REALLY like it. I have been following it and it really helps with not over spending in the business. You HAVE to pay yourself. I wouldn't do it any other way honestly.
I'm in the same situation where my business bank account has a $500 min. How did you end up getting around that? @Carson Fox
@Carson Fox That's awesome to hear! Our plumbing company is at that growth stage where it feels like we are spending money almost faster than we can make it, and I know there is a better way to manage the cash flow. And since we are JUST starting the real estate investing arm of our business, I want to start that the right way. Any tips or tricks related to real estate specifically?
Thanks!!
I’m also curious how this works with rentals. Like what is considered revenue? Is it rent? Noi? Cashflow? How does it work with expenses like leverage?
It also sounds like lots of moving parts as you scale to a number of doors.
If anyone is doing this strategy and happy with it I’d love to connect.
Get a GREAT mentor and do everything they tell you.
@Chuck Dangar Talk to your local bank and get it waved. If they won't do it another bank will.
Btw, we had the author of this book (Mike Michaelowicz) on the BiggerPocket Business Podcast a few week ago, talking about this very topic!
One of the best ways to use Profit First with rentals is to set up separate accounts for vacancy / turnover costs, repairs and major upgrades. By saving a small % each month for these costs you have the money to pay them when they come up. It won't mess with your cashflow and smooths everything out. When it's time for a new roof you already have the money set aside to pay for it.
I'm using this method and love it. I have questions for anyone that is a pro. I've only been doing it for a few months.
I want to suggest that anyone getting into it for the first time, they look up Relay and use them as their bank.