Profit First: Maximize Profits & Reclaim Your Time this Tax Season

Note from Larissa for Donna… Tax season, I know. This time of year has a way of making everyone feel like a chicken running around without a head. I know Donna is busy making sure her clients are taken care of and is well on her way to the other side of this season. However, Donna has a few systems on her side, guiding her through this season more easily than I have ever seen.

At this point, you know the power that Profit First has in increasing your profitability, but we have neglected to talk about one way having strong systems in place within your business benefits you. A strong system saves you the most valuable currency you have: your time. Business gurus love throwing around the term time is money, but let’s remember that the inverse is not true. Money isn’t time, and we cannot pay someone to have 25 hours in a day. With this in mind, it should be important to us as business owners to maximize our profits while minimizing the time spent on earning that profit.

Now I know the way I worded that last sentence, it may seem like I am advising you to lower the quality of your work. I’m not, and I think that part of owning our own business is the pride we gain from the quality of our work. When I say we should maximize our profits and minimize our time, I mean that as business owners, we are gifted with the ability to create a nearly endless amount of busy work. How many of you have spent way too much time stressing about a stray pixel on our logos? That is how we should begin to feel about our taxes. We spend way too much time stressing about something that, for most of us, doesn’t make a profit. Tax work is mostly researching laws and filling out forms anyway. So how do we maximize the time we spend on making a profit and minimize the time we spend stressing about our taxes?

Well, first and foremost, let’s accept that getting someone else to do our taxes is a good idea. We keep ourselves unbiased, we have the assurance that someone else will keep us regionally compliant, and we are free to do our own work. Even among tax professionals, it's commonplace to hire someone else to keep themselves unbiased. Now you might be thinking: But they cost so much money? Well, that’s what Profit First is for. By cutting out expenses that we don’t really need to run our business, we provide ourselves with the windfall we need to pay for the professional services we need. It’s also worth remembering that just because you don’t see an invoice with a big number attached to it when you work on your own taxes, you aren’t costing yourself money. The time saved by hiring a tax professional can be spent developing our business, completing essential work, or landing that next important client. 

I had a client that had been working with me for many years, and while they had considerable revenue... they always had a difficult tax season. They never had the funding to pay their taxes at the end of the year, and as a construction company, they were often forced to wait until their next busy season to finally pay off that bill. They asked me why they never had the funds to pay their taxes off at the end of the year. This is where the vast majority of businesses fall every year and where the concept of entrepreneurial poverty comes from. Simply put, we spend all year trying to turn a profit, and we might be able to pay ourselves, but then we need to work even harder to pay off the fortune we owe in taxes. I want to tell you that this isn’t normal, and we can fix it. As a matter of fact, I want you to complete your taxes in a single meeting with your tax professional, give them the money, and walk out to spend time with your kids every January. We need to maximize our profit and minimize the time we spend stressed about making year-ends meet.

For that construction company, I tried to sell them on Profit First, and they were a little wary. It's understandable, and implementing that system in one fell swoop can be frightening. So, using the flexibility of the system, I made a modified system where all of their income was put into one account. Then we split out contractor money from the top and split the rest between a Taxes and Operations account. We did this for a year, and when the 2022 tax season approached, I asked them how they were feeling about their taxes. With a laugh and a cheery mood, they told me they were making estimated tax payments throughout the year and were ready to be done with the tax season on January 2nd. They were going to spend January with their family and start the year off right. They maximize their profits and minimize the time they spend on things they should be worried about.

This is the power of Profit First; it doesn’t just increase your profitability; it gives you your time back. Are you ready to do the same?