Wow, that's expensive. The Profit First 1% Challenge

If you began the 1% Challenge two weeks ago, you might have started to feel some aches and pains. Transitioning to a Profit First system is no small feat. Most businesses operate at full throttle, albeit in an unsteady manner—spending whatever funds are available and turning to debt when cash runs out. Naturally, even a modest adjustment, such as redirecting just 1% of revenue, can feel drastic.

This brings us to one of the most challenging aspects of Profit First:

Cut Costs Creatively

I had a similar issue in my business. I was spending too much, and couldn’t properly support the 1% savings I was doing every month. For me, I looked at my technology stack. Lo and behold I was using Ring Central, Zoom, and Teams. Of course, all of these do the same thing but I had clients who preferred different apps. When I looked at the amount I was spending on these products, however, my tune changed immediately. I was spending ten thousand annually on those apps, and I immediately made the decision to consolidate. My recommendation? Look at what you’re not using, and what overlaps. If you have multiple products that can do the same thing, then you don’t need both of them.

That’s how I cut costs and began my Profit First journey.Implementing this system allowed me to dramatically improve my company’s financial health, adding a zero to our bottom line.

But how do you uncover unnecessary expenses in your business to successfully tackle the 1% Challenge? Every business has its low-hanging fruit—easy opportunities for cost reduction. For example:

• Instead of purchasing costly ink for printing, you might consider using a local library.

• Instead of dining at a luxury club to impress clients, opt for a more budget-friendly restaurant that still offers great service.

To identify your low-hanging fruit:

1. Start by meticulously recording your expenses.

2. Evaluate your spending habits.

3. Partner with your accountant—they can help you analyze your financial patterns and, most importantly, devise strategies to limit your expenses.

One practical tip:If you need to buy a new desk for a team member, consider setting a cash budget instead of resorting to a credit card. And if carrying enough cash for the desk feels impractical, it might be a sign that the desk is overpriced.