Sponsored by Fit for Profit
By Shannon Simmons, Special FBA Contributor
One of the best things about using Profit First in your business, aside from the peace of mind in knowing the money you need is there when you need it, is quarterly profit distribution time. Once a quarter, you get to dig into your Profit bank account and take a portion of it--half, if you’re following Profit First carefully--and distribute it to yourself.
The amount in your Profit account will fluctuate from quarter to quarter based on your business’s revenue for that quarter, but you should always set aside the same percentage. We recommend that businesses start with putting 5% of all revenue into a Profit account, but that may increase as your business grows. (That’s a topic for another article.)
That brings us back to the joy of the profit distribution.
Maybe you were the proud recipient of a quarterly bonus back in your corporate days. You worked your tail off making sales so you could earn a percentage of those sales, for which you were paid once a quarter. Or maybe you received a bonus at the end of the year...IF the company or your team was profitable for the year. But you never knew how much that bonus was going to be until it landed on your paycheck.
With Profit First, you already know you’re going to be profitable. That’s the whole point of the system. And as the business owner, you can easily watch that Profit account grow--week by week and month by month.
And each quarter, you get to take half of that Profit account and give yourself a bonus to do with whatever you wish. Personally. Not in your business.
Depending on the amount of that distribution, you’ll want to have a plan in place for what you’ll do with it.
Smaller Distributions (less than $250 to $2000)
- Find a way to treat yourself. What’s your favorite way to pamper yourself? Playing hookie with one of your kids? Take them to lunch and a movie! Date night? Go to that great new restaurant that you’ve been hearing about. Time alone? Book yourself a spa day. The key is to do something special that you love to do!
- Take a staycation. So many of us have avoided travel over the last 18+ months. It’s time to take some time away! Book yourself an Airbnb for a night or a weekend in your hometown or a nearby town. Use the time to catch up on reading or sleeping or do some sightseeing.
- Buy that thing you’ve had your eye on. This could be a new piece of technology, a new outfit, a framed print for your living room, or maybe even a piece of furniture. Stop pining over it and just buy it already. You have the funds for it!
- Pay down personal debt. If you have a good chunk of money in your Profit account, you should have very little (if any) business debt. If you have some personal debt, your profit distribution is a great tool to paying it down.
Larger Distributions (more than $2000)
- Pay it forward. When your distributions are larger, you can afford to pay it forward. Consider gifting all or part of your distribution to a cause you care about. Or divide it among several causes.
- Save for a bigger purchase. Do you have a kiddo getting ready to turn 16? You can use the money to help fund a future car purchase--for the teenager or for you. Or maybe you have a kitchen remodel you’d love to do and want to pay cash. Sock that money away for later!
- Invest in your future. Business owners often think about what’s going on today rather than what will be needed in the future. If you don’t have a healthy retirement account right now, consider putting some of your profits away for later.
Does this list make you a little excited about putting away 5% of your revenue into a Profit account twice a month? It’s incredibly exciting to watch that account grow and start dreaming about what you’ll do with the money.
One word of caution: It’s very tempting to take your profit and reinvest it into the business. So many business owners do this, but don’t be swayed by others! You’ve earned your profit, and it’s part of your income as the business owner. Take it!
Shannon Simmons is a Certified Profit First Professional and Certified QuickBooks Pro Advisor, specializing in working with fitness and wellness businesses. Her practice, Fit For Profit, helps small business owners grow financially healthy and personally fulfilling businesses.