“Success is not about the destination, but the journey” — Jeff Bezos
Most business owners go down the entrepreneurial path for 3 reasons:
- To make more money
- To work fewer hours
- Follow a passion
Not to say that I’m uninterested in #3, but I was definitely motivated by #1-2 when I got started.
Having been exposed to accounting theory and public company financial statements throughout my career, I assumed profitability would be an easy achievement (so long as I picked the right business to get into).
I quickly learned that small business profits do not follow many of the theoretical concepts taught in Accounting 101-401 (apologies to my fellow CPA nerds).
Instead, as owners, we do a lot of “stuff” in our businesses and hope that positive earnings will follow. It’s an action first, wait-and-see second approach
Today, I’d like to introduce you to a concept I call the profit journey.
We all want it, we’re just taking different paths to get there.
First, let’s look at the typical (stereotypical?) journey:
- Action/hustle — continually hack away at working in the business with no real thought for the #’s
- DIY books — a self-starter set of financials that are more of a half-truth… timing and consistency are spotty during this phase
- Desire for more — maybe we see a competitor doing well, or maybe it’s fear of accepting our own #’s, but at some point we all have the desire to do it right
My business partner is a methodical operator, his brain is wired for solving problems; but he absolutely loves numbers (and profit), so he truly enjoys the content we preach at Profit Mastery.
A few weeks ago, we came to an “aha” moment for how the profit journey should work…
Cash → Books → Training → Support
- Cash — What better place to start than cash management? We start here because it’s oxygen for your business. Plus, if you can learn to balance a checkbook, then you can learn to manage cash flow. No accounting knowledge needed, no bookkeeping, no monthly close… just cash.
- Books — After (or while) you’re pinning down cash, you’ll want to invest in a good set of books (the accounting kind). Cup up your own cheesy analogy here: driving without a dashboard, flying blind, etc. Here’s the reality: something like 60-70% of small businesses manage their own books without an accountant’s support and another 60% or so feel they make frequent mistakes in their accounting. Spend the money, hire help, get it done right (and consistently).
- Training — This will be the bulk of your time investment. With a simple cash management program and a set of financial statements in hand, you’re ready to add knowledge (learn) and tools (practice) to your financial management system. Learning is evergreen, not finite. It never stops. So think of this step/phase as ongoing; you’ll pick up new tools to start using, but you’ll continually refine your ability to use them.
- Support — At this point: you’re tracking cash flow, have a set of financial statements, and you’re using tools (reports). Now you’re ready for guidance on achieving your dreams and goals. This could come through hired support like a CFO or fractional CFO, as part of a community, a peer group, or through a mentor/advisor. The point here is to get support in reading & using your financial info to bridge the gap to your ultimate goals.
That’s the process in a nutshell. Like your business, it never ends. You’ll find yourself occasionally stepping down the ladder to fix or tweak something in the earlier stages and that’s perfectly fine.
Also, don’t feel the need to “rush” through these; it’s more a loose guideline than firm structure. You could spend your entire career as a business owner in the training phase while simultaneously in the support phase!