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Profit First Accounting

Jason. I sat down real quick. We had a conversation. All these great tips come out while we're in the chat room outside here. Just like online. Do you mind sharing what you were thinking? So when somebody lets the number go, it can. He bought up and redirected to and use the pizza company as an example. Similarly online. If your competitors probably not a big company like Amazon, but a smaller mom and pop company that might still be getting some traffic. They're not always paying attention when their domains expires. So you kind of following their sites that will actually follow it for you. Pay him a couple bucks, even like go. Daddy has a service that will actually follow domains that you want. Okay, so if I wanted abc dot com, I could tell it to follow abc dot com until it became available on. Then you capture site, and you can as soon as it comes up. It usually goes to auction, so you kind of got a fight. A few people for it, but the traffics already flowing there from the homecomin...

g Great idea. That's a great and you steal it out from under him because they were too. Now you've toe. Actually, you know, I even they forgot or they went out of business and that is banned in the site, but still getting traffic if it's still getting traffic. That's why I love that tip on. Donahue had something to. But you think you remember about toggles and I thought, This is cool. Yes. During the break, I was thinking about dog ALS, and I'm pretty sure what I remember is that they also found out that apparently dogs get cataracts and after cataract surgery, they need. They need to wear sunglasses just like people dio. And so they started marketing to the veterinary community. So the veterinary I apparently there are veterinarians who specialize in eye surgery for dogs. So that was another niche for them. And when you were saying that outside, it reminds me of the vendor well, like now they can build relations with these men. These doctors and these doctors could be referring. It's It's a great opportunity. So yeah, the power of the niche right when you focus on the niche in the vendor Well, so I want to share some more stories about me of morally the dark side of business, and I wonder if it relates to your experiences toe. So I told you about my two companies. That group both were multimillion dollar companies. Both of them struggled for long periods of time. My first company was in computer networks, and there was more than one occasion that I didn't know. How does that make payroll when the company was its biggest? While I was there 15 maybe 20 employees. And there were certain days, certain months be the oh, my God, moments like what am I gonna dio? I don't have enough money to cover payroll and panic and then with the forensics company. When we sold that company, it sold for millions and it covered all our debts. But we have $250,000 of 200,000. Our credit line that was maxed when we sold the company. So the first thing I did when I took my personal income or before I did from the sell the company we have paid back the line, they pay taxes that was killer. And then the net money came to me and I realized that there was a behavior hat And this is why I'm curious. If you guys experience the same thing in our online community to is that I was living on a political the bank balance, accounting. What I mean by that is every day I would look at the bank balance and I say a lot of money in there today. I can pay my bills. I can't pay payroll in a dispersed all the money. Whatever was in that on that plate of money, all money begun. By the time I was done with that session, more often than not, I would go in. I look like Oh my God, I have bills coming up. There's not enough money on this plate. And then I would panic. Interestingly, I was actually to school. It was a finance major. I went through, like, four years of accounting. You don't have to Yeah, finance Major and I lot I just enjoy math. But accounting just frustrated May in college and it frustrated me. Maurin business. I don't do like I was telling you yesterday P and l's profit and loss or income statements, cash flow analysis, like do any you do cash flow in houses. Do you know how to read a balance sheet. Good government singer had no. And then the online audience. Like, Do you really use your balance sheet every day? And are you checking out your cash flow? And when you check the P and L, Are you checking it once 1/4 once a week? Are you even checking it or like me? Are you doing this where your accountant cause you at the year end? And that's where you find out if you actually made money or not like my accountant would call me and say Hey, this year, Congratulations. You made $10,000 in profit, my great. Where is it? Because nowhere to be found more often that he called Say, you know, stuff here is Have you guys had tough year? You lost 30,000 or 50,000 like that was it? I thought we lost more because I can't find the cash I was taught in college. And I thought, That's how you run your business. You have to use these statements and you have to use accounting principles. There's a thing called Gap General counted are generally accepted accounting principles, I think, if, uh who said If the glove doesn't fit, you must acquit. That was Johnnie Cochran. Yeah. I think if he was still alive, he would say the gap is crap because I don't think who really run your business off. Once I had this realization. This is five, maybe six years ago. I came up with a concept I call profit first. And why I realized was that the accounting profit statement The profit loss statement is actually upside down. What? Profit loss, statements and income statements. Palaces. First, you make revenue, right? You have, say, $50,000 of sales this year. Then it says right below that you have costs of goods sold. What are the expenses that you incurred to produce that revenue? Maybe you bought materials that you assembled. Maybe did certain service work. You got to go out to certain venues. Maybe you bought products they had sell online. Maybe you were out assembling stuff that's cost a good soldier. Spending your time. There's value. We went through the exercise earlier. You know, that's every minute you spend is worth something. After cost of goods sold, you have them what they call net. Um, no, not net profit. gross profit and gross profit is it's just a phantom number. It just basically says, Here's how much money you still have left before you lose it all elsewhere because they didn't have to pay was called SGN a Say US sales in general. Um, what sales and General Online? What's s DNA? Can't remember Right now? These, basically is the accumulation of all other costs in the profit in the P and L statement. Then at the end below that this is then you have owner distribution. That's the pay for you. And then in the accounting system, it says a TSA very bomb. It says profit. And there's usually parentheses around that, which means a loss. Well, why is this system wrong? I mean, technically, it's accurate, but wrong because it doesn't play into human nature. My focus when I looked at my profit and loss statement was always I got to get more sales. I got to get more sales at the top line, and why am I going to do to generate those sales expenses? So all I cared about was sow more spend to support the sales, try spend less, but sell more, spend less the very last thought in the income statement is owner pay and profit basically tells us worry about that last and therefore we don't worry about it. So I thought What? He flipped it over. What if you said profit was the first thing you talk and then owners pay? And then the costs came at the last consideration. How would that work? And once I did that and tried it out, it changed everything. Now here's the first thing people say to me, Mike, it's a shell game. It's a It's the exact same amount of money. You're just moving into different spots, but 100 bucks split up anyway. It's 100 bucks. Not true. Our behavior changes and what they tell question Iwas do. They wouldn't shout out with SG and a stands for God who gets who. It's from food for selling, general and administrative expenses, administrative, administrative selling, general administrative cost. Thank you. Yeah, Yeah. You know, like what you're saying really resonates And I have talked to clients, small business owners who will say to me they've been in business for a couple of years and they and they have employees and they they've never taken a penny out of their business. They've never gotten paid. And I'll say to them, Well, what's going on? And then they'll also say, And my accountant tells me I'm making a profit and they will. They'll say to me, Well, I think it's gonna be a couple more years before I can take any money out. But I know that you have the solutions thanks to set up there, but I think it's very common. It's very cool. Final survey right now in three audience online and writing studio here. How many people honestly run their business? Check the check. Okay. Every single person razor. Every single person is an online. I don't know where you are. There you are online. Tell us Senate into our hosts here. How many of your businesses are your business? Are you running it? Check to check. Meaning sometimes you can make it. Sometimes you can't. Second question I have for you and for all of us in here is are you doing bank balance? Accounting Meaning? Do you look at how much money's in the bank count and then determine what you can spend. Just tell us. Is that true? every single person. Ok, good. So I'm not crazy. It wasn't just may. It's all of us. And I'm here to tell you you're doing the right thing. We've just been told the wrong way to do it. I want to tell you a whole new way. But first we play. I discovered it like the big build up the big bill of exactly hit the cliffhanger, right? First the bullet to the face And, um that's from yesterday online community. So I studied die. Anyone ever Milan diet any kind of diet. I changed. I everyone everywhere. You must never, never been. So most diets fail. I'm actually almost every diet fails, and I want to do a quick survey. Workmen black marker of why diets fail. Do they? Wouldn't have the ideas of why diets fail their fun. Not fun. What else? Short term, they're not long term. Short term. Exactly. Stain it based on restricting restriction. Not on a specific kind of something too specific too, right? Yeah. He just great proof and rest of your life for the wrong reasons. It also it feels like deprivation. Deprivation? Yep. Um, what? Anything else? Accountability. Definitely online. Says diets fail because it puts focus on what you're denying yourself, and that is what you face more than the positive focus on denial. I love that one. And accountability, right? There's no accountability would say chemical love, that accountability like there. Usually there's no accountability. Anything else? Why diets fail? They're brought up their intense, you know, when the common here, I'll tell you. Here's the form of losing way. If you want to know it, e only vegetables work out like a mad dog on drink Tons of water. Any time you're hungry, just drink water. You'll start losing weight. Way too intense. The only person myself, the Campbells, you. It's short time. Way too specific sometimes airway. Not too specific. Just eat. Last dude like that's often the common one. It focuses on denial. It doesn't play into our natural tendencies. There is. They found one way to assuredly start losing weight. One adjustment. Well, it's actually three things you have to do if you want to lose weight. First of all, um, change your eating frequency. Have a controlled frequency. Um, and often what they tell us and diets is eat more often. Smaller portions more often so you don't have any hungry feelings to go into a binge. The second thing they found in what works for diets, smaller portions and you know how to get smaller portions get smaller plates because it's the tendency of all of us. And we've been trained to do this, for God's sake. My mother told me 1000 times. Um, what's on your plate? There's people starting somewhere. I don't even know what the That doesn't make sense to me, but I always had a finish what's on my plate? Because someone was starving. So I had to, you know, everything on my plate. But interestingly, they found scientists found that whatever the plate portion is, most of us eat the entire plate. At dinner, we all finish off our plate, and we when we serve ourselves, we served ourselves to the entirety of the plate. If you look at homes from the fifties compared to homes today, the biggest change has been plates. Our house is like I thought was a flying saucer landed. It was a plate, I e. I mean, they're like this big my my son's cereal bowls when I was a kid, actually wasn't answerable. It was like a little box. You get you cut open, you put a little milk America, get there like the one cheerio stuck to your lip cereal bowls or half of this big. And sure enough, my sons and myself, you fill it up until it hits the rim. We filter the portion assigned to us. Yes, expand on that analogy. We remodeled our kitchen a few years ago, and we actually had to get oversized cabinets to accommodate the size over large plates. Kidding. I am not getting May, I said. My plates air this big. Are they going to fit in these cabinets? And they said, No way is that you can figure and bigger to accommodate. Wow, it's a sad state of affairs. I mean, it's interesting how you look at it, Yeah, but at, but it absolutely shows how everything expand everything. Everything expands. One thing stands everything. So thanks for sharing. That's that's shocking. And what they found is simply adjust the plate size and we will eat less the third thing. Remove temptation. And they found that in study after study temptation that when they did these three things stand the sites. You can see a lot better when they change the frequency of eating. Just eat a little more often, eat from a smaller plate and remove the stuff that's bad for you. From availability. We ate better because what happened in our habits now is when we were hungry before in this situation like Oh my God, I'm starving. I can't handle it any longer What I have and you'd have like some horrible junk food, My preferences. Twinkies. Thank God they're back in business. You Twinkies! Car got got, got got, got or get one of the Ben and Jerry's. It is like, you know, Elections movie and no, sudden, Where's all the Ben and Jerry's? My stomach, right? Remove the temptation. One thing we did our house is there's no soda, you know, if they're sort of there, I'd be drinking. There's no soda. There's no temptation. Sometimes I crave a soda. I'd love to have a nice Coke and go always store to get a Coke. I drink water and it's out of my mind. Temptations been removed. Small plates. My wife, actually, and I got revolt of cereals with a cereal bowl realignment, and we reduced that and we more frequently. So we've set up a little. You see, actually have been to my house down and we have little healthy snacks. There's vegetable snacks and fruits. Next week, our kids, the whole road, whole Roadhouse. When our kids come down back from school, they eat that between lunch and dinner. It's it's a quick snack, and it's we've increased the frequency. But once I discovered this with with diets and like, Why, why don't we pointing diets to our business? Because, interestingly, in our business, accounting is not. I mean, you guys said it all. It's not fun with the very short term focus. Pay what you can now panic. There's there's restriction applied. The rules are way too specific, and they're so specific they're not specific. It all known knows what's going on. There's no accountability whatsoever in accounting. You're accountable to yourself, but there's no one else holding you accountable. What I found is, if we flipped the accounting over, we can now apply these principles of diet of a proper diet. We can first change the frequency first, tell you the exact process to follow, and then I'll give you the details of why this works What I found. And now our bookkeeper actually teaches other people, Don and I. We have a bookkeeper for our company and for my own businesses. I apply the same method. Pay start paying bills on Lee twice a month. Don't pay him when you can or you can't on the 10th and 24th of the month is the best time to pay bills. Actually, is the best time. Do all your accounting. Why are those days significant on the 10th if you pay bills on the 10th they arrived, typically by the 15th of you male amount or your bank does the mailing for you. That's when usually half your bills or doing the 15th. The other popular day is the first month send on the 24th arrives in the first. The nice thing about this is it starts getting you in a frequency before it was binge eating, just like Oh my God, I need to pay bills, stuff, Twinkies, my mouth equivalent. Now you're getting into a discipline of this regularity. There's other powerful benefits that the second, the second thing is smaller plates. What I mean by smaller plates and this is the real profit. The real benefit of profit. First is every time a deposit comes in right now, you're putting on one massive plate. You have a checking account and you get a nice check in for $1000. We get some small checks for 50 or 100 bucks. They all pile onto the same plate. Then, when it comes to your accounting, whenever you're doing, you look at that one massive plate and you start spending it. And if you're like me, you do the worst thing that I do. I still do it, but with this new system, it prevents it. I look at my bank account, say there's $5000 in there, Michael, 5000 bucks. That means I can pay all my bills or I could pay myself or I could. I could invest this new equipment, and in my head I account for that money in three different spots, and I envisioned a $ actually spreading out in doing $15,000 worth of stuff. And then we pay the first bill on, like where it will go and continues the panic. Here's the smaller plates every time a deposit comes in, I want you to divide your money immediately. Your business and many of our businesses are at this size were doing under a 250,000 revenue. I studied businesses of all different sizes and found that optimal businesses run at generally these percentages. So why I wanted to do is set up four accounts with your bank. You currently have one account, which is your operating account, and you're putting all your money in here now. I'm suggesting you said three additional. My handwriting is very difficult to read. I understand the first account only SAP is called profit. First, this is an account where we're gonna put our prophet immediately into it. And I suggest and we'll get to the percentages in a minute that 5% of every deposit goes in there because I found optimally. Companies that are up to $250, revenue are generating about 5% in profit a year. A company is running really healthfully growing was growing healthy is running 5% profit. The next account I want except with your bank. It's called partner pay. And the nice thing about partner pay is If you're the only partner, the only owner All this money is assigned to you. If you have multiple partners, you divide up the money. Right. Um, now, I'm not suggesting don't have partners because you don't want to be a money hug. Having a partner is very awesome. But if you're the only person in your business, you get more pack tax reserve is 15%. And then if you do the rest, the math it boils at the 45%. So, operations, 45%. Okay, Now, this is how the smaller plate works. Yes, taxes are only 15. Everywhere you read and heard is 30 30 right? Like that. It's just that I have been taking us right off my profit and putting it right into her, right? So we're told you generally in the U. S. And other countries, they actually can be even steeper. Believe or not, we have low income tax comparatively for most people, 30% of your income is taxable personally, but why only 15%? Because expenses air not taxable. And about half your money is going to be allotted for expenses. So that means Onley half of that 30% of your total income is going to tax. Okay. Hater. Okay. He was crying. And like we should be. They, like brother and sister. Just crying a lot of time. So, yes, Game changer. This is hated by pure money. Now, let's just kind of rewind. Here's what most of us are doing right now. Ah, 100% goes in here. We don't We don't do these other parts. We spend all the money that's in here because all the money available is the one big plate. And then once 1/4 your text tax estimates come dio. And that's when you Oh, my God. Tax out. I told him for Guyot taxes. The next sale I get is gonna go pay taxes that you and you totally ignore yourself. Like I have to go without pay again. I'm not gonna pay myself and profit. That's joke. I mean, that's an absolute joke, right? A profit profit if you start dividing your money up into plates Now, I say you do for every deposit because you're only doing counting on the 10th and 24th. Nothing else happens. So you get a deposit on the first. It just goes into the bank. Come. Another check comes in. The second goes in the bank. Something comes in the fifth. It goes in the back. You don't do anything with it there on the 10th. The first thing you do is you divide up with your plates. You divide up with your plates immediately. 5% goes into your profit account. 0.35% goes into your your personal pay account. Why so much money? People ask Mike. That's so much money. Your urine employees. You're the number one employee. No one works harder than you. And guess what? You built the business to support your lifestyle, not for your lifestyle to support the business. That's why you deserve that much money and your business can support it. Then 15% goes into the tax reserve. Here's what happens now. People like Mike. This is a shell game. You know, I'll just move the money around. This starts forcing critical decisions. It starts changing our behavior. Now, when you look your bills and invoices, you have, you recognize of all the money is coming in, only 45% of it is available to pay your bills, and now you start becoming really critical saying, Hold on, I can't pay the bills way too much. I'm dumping. This thing is going away. Has to go away. I am telling this is the rule. You got to find how to run your business on 45% of your income. And that allows all this other stuff to free up. Yeah. What do you do with the 5% profit? We're told me. Oh, awesome question. But it was perfect. I think you are my sister. He's totally set me up perfectly. I'm starting to cry again. June, Um, the last thing was removed. Temptation. Remember that rule from diet Remove temptation. So this is what you do with that? 5% and enough. Explain it further. You want to remove the temptation? This account in your bank of 5% set up another account with another bank that you is difficult for you to access is just a pain. I work with the federal credit union. I love federal credit unions, by the way, but you can work with a major bank to their awesome if they will work with you. But my federal credit unions just great. I mean, they'll call you up if there's an issue or question. But I also account with ETrade an e trade. I have my profit account, So every time I 5% goes into my bank account, once the money is in there, I call E Trade. It's, ah, laborious task. I call and say, Hey, I have ah, $700. It's on my account. Please withdraw the money and put it my main account. It's laborious because the money once is there. It's a pain to get back at the pick up the phone, Call them ask for release. It's a pain. It's out of sight. I don't access e trade account. There's all these like there's always ways to get in with numbers and codes at the type, and it's confusing his hack. So basically, it's it's the temptation so far removed. I don't know how much money is there, but once 1/4 when I look, I'm like, Oh my God, I can only take $10,000 for $15, in profits and I totally forgot I had that. We adjust our behavior to what's made available to us. I talked about Parkinson's law, you know the time made available. Miraculously, we fill it up when you compress it. That's all you fill up when you start removing. When you start removing the profit first, your business will adjust. It has to adjust, and you'll find a way to do it. Um, so that's the basic formula. Couple more details on what you do, and I want to bring something up. I'm gonna walk you through through a profit first, Um, as the money accumulates in the profit first account, so say $100 check came in, $5 would go into profit first, right, That now gets transferred offline. It starts accumulating. Why now? What you do is once 1/4 the quarter ends September 30th. You go your profit first accounting. You take a distribution, you take profit for yourself. They don't take all of it. Take 50%. So say over the quarters have $1000 accumulated. You would take out $500 as a prophet 500 stay in their money stays in there because it's your rainy day account. You're actually become your own little bank. You're accumulating some money just in case there's an absolute emergency. But the money you take out is your profit. And here's the trick. Your Onley allowed to use that money for a celebration. You take your family out for a vacation, you go out to the nicest dinner you have in a long time. You celebrate with friends, you have a pardon. You do not in any circumstance ever put it back in the business. Because the second you done that, you defeated it. You defeated the whole system. You ruined your diet. Profit is there for you to celebrate. Your business was founded and built to serve you. This is why we built the whole business. But Gap Accounting has told us notes all about make cells that make sales and pay expenses. And I'm telling you, make sales take a profit. Pay yourself in the expenses. Are you going to cry now You're gonna make me cry? I love the whole idea of enjoying life. The hope of doing this like it's just awesome moments may ask them, and I think that we just have so many in the room. I mean, not just from juniper. I think everybody something happy being the lights going on and something that's been happening in the going online? Yeah. People talking about their emergency fund. Somebody's called it something else. I won't repeat it very well, but yeah, I mean, people are really identified with this. Yeah, Yeah. You know, I recall the other day we had a whole conversation about what happens when you're working really hard in your business, and you don't take any money out. You start to resent your business, and we see a lot of business owners doing this. They start to feel resentful towards their business. Everything feels like a chore because they feel like they're working for free and that they're working for their business instead of their business for them. Yeah, that's exactly what happens. Yes. Biggest sales month last month. And then my new partner who's helping me with numbers and things like this. She's hard worker also comes down to We did all the numbers and I didn't make any money. And it was the most depressing than two days to try to recover, to try to want to get back to work. You know what you're talking about, So yeah. Thanks for sharing. Kirsten. I know you. We were talking about that you want to share? We used told me outside. It's so frustrating. I mean, I've been doing this for five years now, and I haven't taken a sense. And, you know, I'd rather be taking my kids on a walk or making cookies with them or, you know, doing a science experiment instead of Hold on, honey, I have to make this phone call because I have to make the sale because I can't pay our credit card, you know? And so it gets really, really frustrating, and it makes me not want to do it. And it makes me want to check my business across the wall and never see it again. Oh, so this is really good, though, because it will force me to somehow figure out how to pay bills instead of just work, work, work for free, you know? Well, in the last module, we talked about how to prune those prune the opportunities and the expenses that go with it. So I have a feeling when you go back to your office, you'll be making some changes that will allow you to do that right now. This will force you to do some of the traps that I've seen people falling that I've been doing this with with quite a few clients of mine myself. Profit First account isn't This is the optimal number. You shouldn't start a 5%. I don't know. Never donate blood everything. So I donate blood with some regularity. I should even do it more frequently. But the first time I went, ah, guy was walking out and he had a $5.5 gallon donor sticker was like that. As bad as I wanna be a five gallon donor. So I came in, They said, Oh, you're here to give pleasure. Yeah, I like to get five gallons kill you instantly. He's like the body only has three guns going. Oh, I said, Well, how much Give he's like, you can only give a point and he goes over years, you will give five gallons. I was like, Oh, that's how this works. This is your blood of your company that's going to serve you if you try to go. And I heard people say I'm going 50%. I'm gonna make this a 50% of through 5 50%. Don't be all profit. You're giving all the blood that's flowing through your company away in taking it for yourself. You become a vampire and you're killing yourself. Start small. I suggest, actually, if you're going to start this today and you haven't done one. And by the way, most companies haven't done one yet, and they're starting somewhere in the would already have revenue coming in start at 1%. 1%. It's such a small amount your body, your body, your corporate body doesn't even notice it. I mean, could you imagine how much money came in in sales and for you? $8000. 1% would be $80. Would that make a difference at all? No. But what it does start that first little plate. Those $80 could have been put in an account you would never see tucked away. Then next month say we have another $8000 a month, $80 Times three is 240 bucks over a year. That's, uh, $800,000 have accumulated. I think that's not bad. In a year. Your $1000 check from your business saying Thanks for being my boss. Thank you business. Thanks for being my business and I'll tell you presently, 1%. If she was got up to 5% of $8000 that's 400 bucks a month, 400 times 12 months of fourth. That's almost $5000. Now that's accumulated. Now you're taking nice little distributions now. And when you take a distribution, don't take all of it's a rainy day fund. So if you took if you $5000 accumulated with those sales and took 5000 out, if you had a holy moly moment your next month and you need money, that's what that's there for an absolute emergency. But if you take half of it and you shouldn't celebrate 2500 bucks, you can go in pretty nice vacation. You gonna do something pretty nice with 2500 bucks and now and save your company being this resentful leech like cures and I were talking outside, I'm like, Tell me this an actor description, cause that's how I felt about my business. Is your three Children, three Children and now you have 1/4 Children. The bastard child is called your company, and what it's always like I need more attention is like leaching and sucking off of you. And you're literally neglecting your actual family for this bastard child we've developed. When the business was born. It was a beautiful moment. I started a business. It's glorious. Evren celebrating an entrepreneur. And two days later, like this son of a bitches. Kelly may This will correct. It will force you to correct it. And all the systems that Don has taught you those stuff I've been sharing. This is how you start getting there. Yeah. 3 18 Media is asking if you're one person operation the partner pay is where you pay yourself just for or they just want clarification through all the accounts. That's excellent. So 5% accumulates in your profit first account, 35% goes into your pay account. If your company just around number sake does $100,000 in revenue annually, $35,000 will be going through this account. That's all the money you can take. One classic mistake I see entrepreneurs make is on $100,000 company. They say I got be making $70,000. I got I got to. My lifestyle requires that and they take all the money they can and none of the other numbers work. So then what you do? You take out credit cards, you start paying bills with credit cards. You can take money here in the whole shell game begins. One of the brutal truth is this number when your businesses and doing so much revenue is telling you you might be taken too much salary and what I want to do. In a few minutes, we'll have someone come up. I have a couple people come up, and we're going to do an analysis on your actual business to see where you're bleeding money. But this is for you as the owner for my account. If I say if I made while not gonna use 8000 because that's a tough they may $1000 this month $350 to go into my payroll count, and then I pay myself on two days. The 10th and 24th is when all my accounting gets done on the 10th outcomes, half of that 350 for me, and then that was fourth remainder 250. My salary is a little volatile, right? That's one of the truth of businesses volatile. Ready? Because if I have a bad month, my salary drops. Here's a little trick I've used. I put a cap on it. If my business is doing really well, say I'm taking $10,000 a month. I don't need to take home $3500 every month. I only take home $3000 every month. The extra 500 that stays in the account in that profit. And the partner pay account causes beyond what I need to take. And then in the next month, five a bad month. I can pull at 500. Does that make sense or am I going? Okay, partner. Pay You pay yourself half what's in there on the 10th and then you hang on to the other twice a month. Every month I pay myself the full amount. Okay, we've put it up, but I just put up, take it twice a month. Like to take a payroll for myself. Yeah. Good question. Yet. So you're not. You're putting money into the partner pay account and then moving it out of the partner Pay account into your personal, exacting account. Exactly. Instability. But Mike, that's so much work. like, just leave it in your big plate. No, because that's a big plate. Don't do it. I eat it at office plate immediately and put on different plate. That's why you dio dio 24 and you move it around again. That goes that. That's what's confusing. Yeah, so let's go through hypothetical here, all right? Don't be sorry. No, just cry. Okay. Sorry. This is awesome questions, because it is a little confusing. So what you do is, But this is month, one will say, and this month will say it's that it is the 10th of the month. Okay, so this is month one, and it's the 10th from the first. The months 1/10 will say just for round numbers. We took $1000 of deposits. Okay, then what I do is I divide this up into my very first account that gets it is my profit account, and I put in 5% so I put in $ into their for me. This is a counter e trade. And by the way, uh, has anyone ever been employees and got a 401 k? Okay. When you have 401 k the former case. A retirement fund. When you had a paycheck, Deb, you got the net. Pay another gross, bigot. The net pay. Did that affect your lifestyle of Did you know, right? Did you look here for a one K account? And at certain points, the holy smokes accumulated a lot of money? No. Did you keep any money in there? Well, there was a little bit, but, I mean, not a lot. How much reporting and how it was presented? I can't even remember. Okay, I'm not. It was a long time. So me ask the question this way. Did you put more money into savings than you would have otherwise? Do you think, um, 41 k force you to just save automatically? Yes. Okay. It did. But then I still used it went necessary. Shame on you. But the idea of a 401 k is eyes. It's been the most powerful savings tool in U. S. History, actually, in world history, because it's on automatic. And we if you have a four, okay, If you get $1000 a month from your employer, the percentage you pick five or 15 or 1% automatically goes into a savings account and you never see it. You just get the net pace. You get checked for $800. Our whole lifestyle adjust very quickly to live off $800 all the savings keeps piling up. People become millionaires on for a one K's because they haven't touched it for 40 years, and then they retire. And there's this huge retirement account. That's the principle of it. Same thing is happening here. $1000 of deposits come in. 50 bucks goes into our profit account. Second thing is our partner pay 35% of the number. I said, Yeah, 35% of $350 goes in there. This is with my local bank. I have an accountant is labeled. This is partner pay Tax Reserve 15%. So $150 goes in here, and the operations, which is expenses, is the difference. So 3 54 4 So this becomes 5 50 Is that right? 5 53 4 54 50. That's a four. Okay, so on the 10th when you do your accounting now all your deposits have come in. You go into your bank count. You see all the deposits of the checks you you checked, you put in there. You look and say OK, we put $1000 of deposited 50 goes into the prophet account with your e trade equivalent offline. 3 50 goes into your payroll count. Tax reserve gets 100 50 operations get for 50. You then say OK, we can take $350 in salary. Now, if you're putting in so much money there that you're you don't need to call the money. You can let some more money accumulate here, but maybe you want to take the full account. That's how much money you and any other partners in your business June would take. The tax reserve sits there. It just piles up until your quarterly estimates or dio. And sure enough, when a crew Westminster do, you'll have enough money to pay taxes and make. This is awesome. Sometimes you'll have actually more money accumulated in here than is necessary. I've actually not have circumstance yet. It may happen. I have never had enough money in my tax reserve account. Sometimes I have too much money reserved, which is nice. Once I settle my taxes of the end of the year. There's little money left. Here goes the partner. Pay Nisman does a nice moment then Then the real stuff happens. I say I have $450 here. I have $800 of bills I got. I gotta pay. I have an obligation to pay those. I gotta negotiate. So the next go around, this thing isn't gonna happen. And I negotiate ICAC. But this is the reality now. How do you do? Is proactively so you don't get the point. We don't have enough money. You know that 45% of your deposits is what you have available for expenses. Look at last month. How many deposits you made. That's a good estimate. And multiply by 45% of you $2000 in deposits. For the last month, he moved by 45%. You have $450 in expenses you can incur if you've mawr expenses in your incurring than that. Right now, you're incurring too many expenses. You have to start cutting expenses immediately. Does that make sense yet? Question. There's nobody else in my life like I'm not married so there is no other support systems. So the partner pay Ah, $1000 a month or even $700 in a month is half assed Muchas I need How much money do you need a month to survive? 1500 minimum? That's not including business expense. This is the beauty about me. This system. You can pick any number you want that you need, and we can calculate everything else that has to happen for that really toe happen. So you need 1500. That is 35% Now. We need someone to calculate because there's no way to do that. My head but 15% divided by 35% will tell us the rest of the numbers. It ultimately tell us the cumulative sales we need to make happen. OK, she's a 1500 bucks a month. Well, that's 35% off some number. So we just need to figure out all these other numbers and tell us how much sales she needs toe have to support that. Most of us say I have whatever sales. I had any 1500 bucks and we start doing the shell game to support it, right? You guilty. is all this. Is the total Okay? Yeah, Well, 4002 inch by 1500. Divided by 15000.35 Yes, we have exactly 4025. Okay, is the total that's your monthly sales necessary for me to take home? 1500. Exactly. And now you can tell You can tell us the other numbers multiply 4 to 85 times 45%. 1928. Okay, um, this is expenses. This is, uh, pay. How much profit would you be accumulating every month? 214. Okay. And then your tax reserve would be tax was 40 15. 15. How much? 642. Okay, that's your monthly breakdown. That's the also the power of the system. You you tell me how much you need to make. We can figure out what needs to happen for this to come. Really? Yeah. Question from Jessica is saying, What if the expenses are lower than 45%? Is the same rule applies? Expenses are lower. Awesome. Congratulations. Keep it that way. Then the money goes into profit. You increase your profit percentage and you'll see. Um, wow. As the business grows, their profit top line for most businesses can grow. Usually, Ah, smaller business has small profit because they're putting more back into the business. They're incurring more expenses. Really? A relatively. But if you're operations air lower, awesome, you're running great business. Don't try to find a way to spend more money. Put the money into the prophet account. My personal profit account is over 15% actually, yeah, I saw 15%. Um, for personal, right? And I know some people that running a 30% profit on businesses of this size go for that. That's what you want. You. If you left it there, let's say in the because we have to save up for gear. We want Pastor Glass. Basically. So could you leave it with that intention? Okay, Yeah, so that all expenses happened monthly. You will have capital expenses, capital expenditures, So that's a great point. So you don't have to spend 1900 bucks Debbie at all. If you can spend 500 bucks a month, sustain, it's good, but let the money Q late there cause there'll be a capital expenditure you have available to you you could take as a prophet. But if you need equipment anyway, which is tax deductible, you can do that.