- Use a Smaller Plate: In dieting, when you have a smaller plate at dinner, you are immediately unable to put as much food on it. This leads to weight loss over time as you are eating less. In business, if you have less money to work with, you will use less. This is based on Parkinson's Law: "Work expands so as to fill the time available for completion."Have you ever waited until the night before to finish a huge term paper that was due for a month? This is Parkinson's Law at work. When you have more money, you tend to use more money. When you have less money, you tend to use less. Having a smaller "plate" will force you to be leaner and more resourceful. With less money to work with, you might...
- Renegotiate that order from your supplier or ask for better terms
- Cancel software subscriptions you aren't using
- Source cheaper prep supplies
- Serve Sequentially:Continuing with the dieting analogy, if you fill your plate with vegetables or salad and eat it first, you will naturally eat less of the unhealthy mac cheese or burger later, thus contributing to weight loss. In business and in life, whatever comes first is given additional significance. This is based on the Primacy Effect: "The tendency to recall information presented at the start of a list better than information at the middle or the end." Have you ever tried to remember a grocery list that has 5-10 items? There's a good chance that you remembered the first item, but less of a chance you remember the following ones. When we take our profit first (vegetables), we assign higher value to it, and less value to the rest of our expenses. At first it may just be symbolic, as we would be taking a smaller amount, but over time - this will grow. When we take our profit first, it becomes more important to us! Doing this allows us to:
- Actually spend money on personal stuff that we've made in the business - Costa Rica, anyone?
- Save money for a rainy day fund
- Measure the success and longevity of our business. Are our profits going up?
- Remove Temptation: If you have less junk food in the house, you will eat less junk food. The same goes in business. If we put aside money for profit or taxes, we'll be less likely to spend it on more inventory or plowing it into the business. Out of sight out of mind.
- Enforce a Rhythm:Those who do not have a daily rhythm or wait a long time in between meals are much more likely to binge and eat junk food. In Profit First, simply log into your account every day or couple of days to check your accounts - since you're putting money aside for different expenses (explained more in the book), you will have more of an idea of how your business is doing financially. It will help erase the boom and bust feelings of spending all the money you have immediately when you get paid, and being stressed and cash strapped for the rest of the month when it's gone. Jumping into your bank accounts to take a quick browse (what you're probably doing already anyway), will give you a better picture of the health of your business.
Sales - Expenses = Profit
to
Sales - Profit = Expenses
Doing this allows us to put our profit first, instead of relying on whatever is left (usually nothing) to pay us. Without Michalowicz, I was heading to a world where I had a millions of dollars in Amazon Sales, and yet my dinner every night would be ramen while sitting in a dirty folding chair. Putting money aside has also allowed Emily and I to start investing and planning for our future. My business does what it's supposed to do now -- it pays me! Instead of my business being a "Cash Eating Monster", it has begun to transform into a "Money Making Machine." If not evident, I highly recommend this book. It's a short book at under 200 pages and is a super easy and interesting read -- Michalowicz is extremely animated and funny throughout. I would love to chat more about it! Feel free to reach out. Links to purchase the following: Profit First https://www.amazon.ca/Profit-First-Transform-Cash-Eating-Money-Making/dp/073521414X https://www.amazon.com/Profit-First-Transform-Cash-Eating-Money-Making/dp/073521414X Profit First for Ecommerce Sellers https://www.amazon.ca/Profit-First-Ecommerce-Sellers-Money-Making/dp/0960028315 https://www.amazon.com/Profit-First-Ecommerce-Sellers-Money-Making/dp/0960028315 [/fusion_text][fusion_content_boxes layout="icon-on-side" columns="1" heading_size="2" iconspin="no" image_max_width="" icon_align="left" animation_direction="left" animation_speed="0.3" hide_on_mobile="small-visibility,medium-visibility,large-visibility" title_size="25px" backgroundcolor="#f2f2f2"][fusion_content_box title="About the Author" backgroundcolor="" icon="" iconflip="" iconrotate="" iconspin="" iconcolor="" circlecolor="" circlebordercolor="" image="https://sellingfromthebeach.com/wp-content/uploads/2020/09/max.png" image_id="992|full" image_max_width="120" link="" linktext="Read More" animation_type="" animation_direction="left" animation_speed="0.3"] Max Sigurdson-Scott is an active 7-Figure Amazon Seller. He loves creating brands, traveling, and all things ecommerce and entrepreneurship. [/fusion_content_box][/fusion_content_boxes][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]