Congratulations on taking the first step towards freedom!
We understand how real estate professionals struggle with finding that fine balance between their work and personal lives, simply due to lack of clear direction in their businesses. After discovering Profit First, our team was able to make impactful (and truly life-changing!) shifts in our business’ finances so we could finally let our business work FOR us!
We know what the Profit First system has done for our business, so we created this quick setup guide to get you started with implementing it in your own business, starting with your next deposit!
Profit First for Real Estate Professionals
1) Set Up the Five Key Bank Accounts
Think of your business’ finances like portion control for weight loss. You habitually fill up your plate and consume most (if not all) of what is presented to you. When you reduce the size of your plate portion, you ultimately consume less while still being satisfied.
This is true when all of your business’ funds live in one bank account. You inevitably spend until the account is empty and needs to be replenished. By using a smaller plate, you ultimately reduce your spending portion. The small plate principle brings immediate clarity to your cash flow to make the smartest financial decisions within your business.
Here are the five accounts you need to establish at your current bank (assuming that you like the bank you work with):
- Income Account (Checking)
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- This acts as your serving tray for your smaller plate accounts. It collects every deposit that comes into your business and will be used to transfer funds to your other accounts based on percentages that you establish with your Profit First Advisor. You won’t be writing checks from this account.
- Profit Account (Savings)
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- Twice a month, you are going to transfer a percentage of your Income Account into this account.
- Owner’s Pay Account (Checking)
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- You are your most important employee, and starting today, you are going to start paying yourself accordingly! Paying yourself first means not taking the leftovers so you can live comfortably while running the business you have always dreamed of.
- Tax Account (Savings)
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- Never fear tax time by setting aside money to cover your corporate and personal tax liabilities. If you collect sales tax, that belongs in a separate account.
- Operating Expenses Account (Checking)
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- Lastly, here’s where you will pay your bills and any payroll.
2) Set Up Two New Savings Accounts at a Different Bank
Just like eating your vegetables first (which gives you all the good nutrition and keeps you from filling up on junk) allocating money to your Profit, Owner’s Pay, Tax, and Operating Expenses before you spend a single dime ensures that your business stays healthy.
For most businesses, the ideal frequency is twice per month – on the 10th and the 25th.
This is more commonly known as the 10/25 rule.
- On these dates (or the nearest workday), transfer the predetermined percentage of cash from your Income Account to the “small plate” accounts.
- Once the funds are allocated to all the individual accounts, transfer the money in both the Profit and Tax Accounts to new, respective accounts at a no-temptation bank. This second bank makes it harder to “borrow” from yourself when money is tight.
3) Determine Your TAPs (Target Allocation Percentages)
The next step is figuring out what are your Target Allocating Percentages (TAPs) are to in order to transfer funds from your Income Account to your other accounts.
Sign Up to download the Instant Assessment Sheet and see where your business stands:
- Identify your company’s Real Revenue* for the last 12 months
- Pick the column that corresponds to your Real Revenue in Figure 1
- Complete the Actual column in Figure 2 with your actual numbers for the last 12 months
- Using the percentages identified in step two, fill out the PF% in Figure 2
- Multiply the Real Revenue number in the Actual column with each PF% and enter the resultant number in the corresponding PF$ row
- For each row, subtract the PF$ number from the Actual number and put the result in the corresponding row in The Bleed column. Note: you may get negative numbers
- For The Fix column, put the word “Increase” if the corresponding The Bleed row is a negative number or the word “Decrease” if it is a positive number
The completed Instant Assessment tells you what you need to do with your allocation of money (either increase or decrease) and by how much (specified in The Bleed column) for each account. Remember, these are simply targets – start with percentages that your business can reasonably do for each account the remainder of this quarter, then work from there.
So just a quick recap…
- Set up the five key bank account with your current bank. We will call this bank “Bank 1” – Income (Checking), Profit (Savings), Owner’s Pay (Checking), Tax (Savings)
- Set up two new savings accounts at a different bank. We will call this bank “Bank 2” – Profit Hold, Tax Hold
- Determine the TAPs (Target Allocation Percentages) for your business using the Instant Assessment. Start with percentages that your business can reasonably do for each account the remainder of this quarter.
As Profit First Professionals for the real estate industry, we believe that you should enjoy running your real estate business without being in fear of your finances. By having an expert on your side, we can collaborate with you on hitting your client sales goals while transforming your business from a cash-eating monster to a money-making machine!
By scheduling regular profit meetings with us, you will have the chance to compare notes, get support, develop strategies to cope with difficulties, and discover how profitable your business really can be!
We can’t wait to join you on this journey towards taking your profit…first! Download the first two chapters of Profit First for FREE now!
