A Step-by-Step Guide to The Truly Profit Plan
If you have followed us for a while you likely know we are big fans of The Truly Profit Plan for business owners. We have discussed how the plan can help you save for retirement, make more money, budget more easily, and achieve those KPI’s.
During these conversations, we have touched on how to execute the Truly Profit Plan and provided Ebooks to oversee the process. However, we have not provided a step-by-step guide to walk you through the process of beginning the Truly Profit Plan.
This guide is intended to provide you with all the information you need to begin implementing the Truly Profit Plan. Whether you are a new business or looking to transition from one budgeting strategy to our plan, this is the perfect place to start.
Let’s get started.
Step 1: Create A Budget For Your Business
To begin, create a list of all your expenses. This should include monthly expenses like subscriptions, payroll expenses, and any annual expenses like tax preparation fees.
Then make a list of the income you expect to earn. How you do this can vary greatly from one business to the next depending on your business model.
Look into the numbers and calculate these 4 areas.
- What percentage are operating expenses?
- How much do you pay yourself?
- How much do you pay for taxes?
- What is your profit margin?
Look for the average percentage of these numbers over a year.
You now have an idea of how your money is spent. However, in the next step, we will be making a recommendation that may require some changes.
Step 2: Make A Specific Plan For Your Monthly Income
This is probably the most important step in the Truly Profit Plan. We recommend you start with opening 4 bank accounts and naming them the following: Owners Pay, Taxes, Profit, and Operating Expenses.
These are the 4 buckets you will be distributing income into every time a sale is made. Then at the end of the period, you will refer to your buckets to see what is budgeted for the upcoming period.
*Note: When we say period, this can vary from one business to the next. Typically we recommend a period being 2 weeks but the same principles can apply if you were to do this on a monthly basis.
Now that you have your 4 bank accounts, we need to determine how much you will distribute into each account when a sale is made. Earlier we calculated how much you have been spending in these 4 categories. Compare those percentages with what we recommend below:
Owners Pay – 40%
Taxes – 10%
Profit – 10%
Operating Expenses – 40%
How do your percentages stack up? Remember the idea with the Truly Profit Plan is to make a profit and paying yourself a priority in your finances. If you are noticing your expenses take a majority of the percentage, review where you can cut back to achieve balance.
The Bank Accounts
Before moving onto step 3, we would like to first review the 4 bank accounts and define the purpose of each.
Owners Pay – Don’t wait to give yourself the leftovers! This is your business, so pay yourself regularly. Set a salary based on the average of your 6 mid-range months of revenue. Take this salary monthly and let the balance accumulate in this bucket.
Taxes – Taxes creep up and they are often the biggest overlooked headache for business owners. Plan for them!
Profit – This is the cream, the reward for all the hard work and risk of being an entrepreneur. Set this aside monthly and every quarter divides it into 3rds. A third should be transferred to an emergency fund savings account until you have 3 months of savings. A third goes towards retirement. A third is a profit you get to have fun with!
Operating Expenses – This is what you have left to spend on running your business, it includes all monthly expenses to run your company including payroll for employees. This is last for a reason, it’s so easy to overspend, to think in order to grow you need to spend more and bring in more revenue. Before you grow you need to manage your spending, pay yourself NOW, and not wait for growth for your payday.
Step 3: Plan for Retirement
The next step in the Truly Profit Plan is to plan for retirement. When it comes to planning for retirement the most important thing you should know is there IS a plan that will fit your needs and budget.
There is a long list of retirement plans available. These plans are not exclusive to big business employees but small-time entrepreneurs can adopt these plans as well.
To learn more about what we suggest when it comes to retirement plans, click here.
Step 4: Find an Expert
The Truly Profit Plan solves a number of challenges faced by entrepreneurs but certainly not all. After establishing yourself on the plan, consider researching an expert that can help you with things like financial analysis, retirement planning for employees, and managing your taxes.