Risk & Business Magazine General Insurance Services - Fall 2020 - Page 18

PROFIT Sales do not translate into profit because we, as humans, spend what we make. If you are smirking that you already know this because you read and implemented Profit First, then you know what I’m talking about. You need an efficient system in place to bring profitability around. To determine whether or not profit is one of the problems you should be focused on, I’m going to give you another sneak peek at the five Core Needs—this time, at the Profit level within The Business Hierarchy of Needs: NEED 1 – DEBT ERADICATION Do you consistently remove debt, or do you accumulate it? NEED 2 – MARGIN HEALTH Do you have healthy profit margins within your offerings, and do you seek ways to improve upon them? NEED 3 – TRANSACTION FREQUENCY Do your clients buy from you instead of the other guy? NEED 4 – PROFITABLE LEVERAGE When debt is used, is it used to generate predictable and increased profitability? NEED 5 – CASH RESERVES Does your business have enough cash reserves to cover all expenses for three months or longer? Once you’ve fixed the right problem, you start reviewing The Business Hierarchy of Needs again from the bottom up. Using The BHN will ensure you are creating a solid foundation for your business. You simply have to focus on the fundamentals. I hope that some of this has helped you get some clarity on exactly what profit is and the role it should have in your business. I am sending you well wishes not only for excellent physical health but entrepreneurial health as well. Keep going, my friends. The world needs you to succeed! + Mike Michalowicz is the entrepreneur behind three multimillion dollar companies and is the author of Profit First, Clockwork, The Pumpkin Plan, and his newest book, Fix This Next. Mike is a former small business columnist for The Wall Street Journal and regularly travels the globe as an entrepreneurial advocate. MikeMichalowicz.com ProfitFirstBook.com 18