3 Tips to Transforming Your Business with the Profit First Method with Kristen Ricupero

3 Tips to Transforming Your Business with the Profit First Method with Kristen Ricupero

Welcome to The Determined Mom Show. I am your host, Amanda Tento. We have the lovely Kristen Ricupero and she is the owner of Financial Fitness Coaching. We will be talking today about three tips for transforming your business with the Profit First Method. So welcome Kristen and tell us a little bit about yourself. 

I am first and foremost, a mom and a wife. I have two kids, they are three and four and I’ve been a financial coach now for about five years between part-time and full-time, I went full-time in 2018. 

It is what lights me up every day. So I started with personal finance only and I was helping people learn how to manage their money better, such as day-to-day budgeting and my first couple of clients were business owners.

What happened was we’d be sitting down and talking about the budget, like how much do you bring home? What’s your schedule? Let’s talk about your income etc. I kept seeing these patterns of them answering along the lines of not knowing how much income they brought home.

I felt like I could serve a very specific community. So that’s when I twisted towards working with business owners specifically, in both their business and their personal life because they were suffering on one end and they weren’t bringing money home and they were working constantly. Then they were suffering at home too because they were trying to figure out how to do all of these things. 

I now assist small business owners to be more profitable, bring home money more consistently and grow in a specific way. Then use that fabulous income to go ahead and build wealth and lead your legacy within your personal financial goals.

That’s awesome and everything you touched on there is still accurate, as far as business owners and just getting those finances under control. I’ve heard at least when I read the Profit First Method book, it’s like when they get that under control, it’s like the whole world opens up and everything just accelerates. Is It like that?

Yes because once you get clarity around those numbers of what everything costs on a monthly basis, it opens up the entire world of what you can budget. We also reverse engineer your numbers and in Profit First, we call it a RIFA, your Required Income For Allocation.So this is how I work with clients on pricing, instead of taking that wild stab and saying, you just need to get more clients. 

When you know that magic number, that you need three clients a month at certain pricing to hit my numbers, It’s different. You sell differently and you walk competently. For most of my clients, we jump in profitability first but within 24 months, they typically are doubling and tripling their revenue as well, which is an increasing take home and everything on it.

The premise is about taking your profit first but it’s about serving yourself and your business first. Thus making sure that you always are running on what’s left over rather than saying I’ve got to pay this bill, that bill and I’ll take what’s left over and so we leverage Parkinson’s law with this as a business owner. 

So many again, just aren’t paying themselves regularly or at all and you will burn out of your business, the business that you love, the passion that you have for it eventually will become burnout and you will resent it. 

Or if you start hiring employees and you start paying them more, which is what happens a lot of the times, you’re like, oh, I need this person. So I’m going to pay them but I’m not going to pay me. You start to resent that person and I’ve seen it over and over and over again.

So to avoid that again, we want to go back to you are the most important person in your business and this would not exist without you, right? So why are we being a martyr and letting ourselves our families and everything else goes? 

What happens, is that when you start to reverse this up, so typical accounting and your accounting do not change. Okay? But typical accounting says, your sales minus your expenses equals your profit. What you have left over is what you profited from this year, right?

Reverse that, to make sure that we are taking out your owner’s pay and your profit, which is how you get to that net income first and so sales minus profit equals your expenses and then we make a decision. 

This can be on what your business can run on, with what you have left over. So it changes the game because money in general, we’re talking personal and business. Finances are not about math. Rarely. It is about the behaviors.

That’s awesome. I love it. So tell us the tips. We’ve gotten already so much out of this but let’s get into the three tips that you’re going to be sharing with us about how we can transform our business using this method. 

Absolutely. So one of my top tips is to customize the account specifically for your niche and your challenges. Here are a couple of examples; now, everybody should have five main five accounts, where all of your revenue is getting dumped into so that you can see it visually. The other part, this is great for creatives because it brings a visual system to your business, and into your money. 

The second one is going to be your profit and that’s important again, that we have these in order and you do them in order, because again, psychologically we’re working with it until you learn it That expense is last and that’s what’s left over. So the second one is profit. 

The third one is going to be your owner’s pay and so again, we want to make sure it is critical to have this as its business bank account. This should not just be going right to your account and that’s for a few reasons because the main one is that we use it as a “hills and valley” account to help balance out your pace. So when you do have those highs and lows, it’s how we kind of balance out, know how to grow, when you want to grow.

If you are an S-corp, we’re typically balancing out tax-wise, how much salary you’re taking versus how much distributions you’re taking and there’s a balance there to be made. So your fourth account then that is important is your tax account so those taxes are separate

Then the fifth one is your operating. So those are the main five but customize them to your business in your niche, if you are a photographer, you may want to also have an equipment expense account.

So photographers are famous for wanting the newest and the best of equipment or upgrading, or just need to upgrade at certain points in levels of their business and new lenses, new cameras, new computers, and storage. 

So you may want to take a subset of that operating expense because the equipment is often a challenge for them and take a portion of that and create its own for equipment so that when you’re ready to upgrade and buy, you have that money set aside in particular and it keeps you on that other operating.

Awesome. Well, thank you so much, Kristen, for giving us so much value and so much insight into the Profit First Method if you want to work with Kristen, definitely go to financialfitnesscoaching.com and connect with her on Instagram.