As a nonprofit consultant, how can you prioritize profit? Ron Saharyan, the co-founder of Profit First Professionals, joined Nonprofit.ist experts for a members-only webinar to show how consultants should be approaching their practice finances.
So, what exactly is Profit First? It’s not your typical accounting or bookkeeping service. It is, in fact, a cash flow system that operates on the principle of allocating profits first, ensuring that business owners prioritize their financial well-being.
A staggering 83% of businesses operate on a check-to-check basis, teetering on the brink of financial instability. This means that a significant portion of businesses are one missed deposit away from potential collapse. Moreover, the harsh reality is that many business owners neglect their own financial well-being in the pursuit of sustaining their ventures. Ron says that business owners can secure their financial future, access loans, and build a solid foundation for growth.
The Formula
Profit First stands out as a pay-yourself-first methodology and draws inspiration from the age-old envelope budgeting method, reinventing it for the business owner. Ron shared the story of watching his grandmother divide cash between physical envelopes, taking only the envelope marked for groceries to the grocery store. Profit First utilizes holding accounts designated for specific purposes in a method similar to envelopes.
Instead of the traditional formula that most people used is Sales - Expenses = Profit. Instead, Profit First uses Sales - Profit = Expenses. While this mindset shift may take time, Ron advocates starting small - 1 to 2% of your income - and building until you’re comfortable with putting Profit First for your practice.
Top Three Misconceptions About Profit First
According to Ron, there are three common misconceptions about the approach.
- It's too time consuming.
- Bank accounts that you need to maintain the system are going to cost a lot of money.
- It’s going to cost you so much money in accounting services because they have to reconcile all these accounts.  
If done wrong, businesses can find themselves in trouble, which is why it’s important to do it the right way. That’s why Ron recommends finding a certified Profit First professional if you want to pursue this approach.
“When you have a blueprint, you have a plan, you have a plan to follow. Nice. Then what's happening is you feel relief. For the first time, relief. Now when you're moving the money, you're empowered.”
Not Just for Business
For nonprofits, a similar approach called Purpose First is something Ron recommends to allow them to be more effective for their cause. Taking into account the differences that nonprofit face, like restricted and unrestricted funding, they can still implement this system, with the ultimate goal being clarity in the purpose of funds.
Profit First is not just a financial system; it's a mindset shift that empowers businesses to thrive in today's competitive landscape. By embracing this approach, businesses can pave the way for sustainable growth, financial stability, and long-term success.
Want to learn more about Ron and his business? Visit https://profitfirstprofessionals.com/.
To watch the full webinar and access all Nonprofit.ist webinars for its experts, join Nonprofit.ist now.
