Last week, I told you my BIG WHY that propelled me into business and also what keeps me motivated to push forward. Where I left off was after I started the company. You see, when I started Knutson CPA, I didn’t really have a “business plan”. My plan was to secure an office, hire the right marketing person, get the word out, and start serving customers. And in the beginning, that’s just what we did.
People came our way, and we would take them on as long as they had a checkbook (and heck, even sometimes when they didn’t!) We worked for anybody and everybody that could pay us, and that fostered crazy growth.
We grew so fast my head begin to spin. Challenges and obstacles cropped up all over the place. There was no time to seriously look at an org chart, software solution, or a growth plan, so we used Band-Aids and Duct Tape on the issues that arose.
By our third year in business, I can say with confidence my business was held together by Band-Aids and Duct Tape! Did I realize there was a problem? You bet! But I didn’t know how to craft a cohesive operating plan- a plan that would allow me to become profitable and actually pay myself. (Moment of truth? I went for two years before taking a paycheck.)
Speaking of taking a paycheck, we have discovered that many small business owners go months or years without paying themselves. Sure, they pay their employees, but their paycheck is the last to be considered when it’s time to run payroll. This can lead to resentment on the owner’s part:
- Resentment toward the wonderful employees they hired to grow the business. And,
- Resentment towards the business itself. The business of their hopes and dreams. Their baby.
Fast forward to the fall of 2014. I discovered the book Profit First by Mike Michalowicz. When I read this book, I learned a new way to look at accounting and a way out of my Band-Aid and Duct Tape mess.
The standard GAAP (Generally Accepted Accounting Principles) equation for finances is:
Income – Expenses = Profit
But Profit First says the way you look at your business should be:
Profit = Income – Expenses
The math is the same, but the perspective is incredibly different. It says that PROFIT is what you shoot for. PROFIT is what you look at first. YOU, business owner, get paid.
Want to know more about this revolutionary way of running a business? Want to hear how it completely pieced together my Band-Aided and Duct-Taped mess? Stay tuned for next week’s blog post!