How do you define profit? Why should you have separate accounts? How does giving your money “a job” remove the emotional value of having to spend money on your business?
In this podcast episode, Joe Sanok speaks with Profit First Professional Rocky Lalvani.
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Meet Rocky Lalvani
Rocky has seen firsthand what it looks like to build a wealthy lifestyle out of nothing through saving, investing, and spending wisely. When he was three years old, his parents moved to America with just $25 dollars to their name. After many years of observing the principles of hard work, saving, investing, and spending wisely, Rocky has been able to happily retire from Corporate America.
Having seen how much of a difference understanding money makes in his own life, Rocky has made it his goal to help others open doors, solve problems, and gain freedom through understanding finances. Rocky now carries out this ambition through his business, Profit First. He has also a podcast – Richer Soul – that talks about life beyond money.
In This Podcast
- The concept behind profit first
- Differentiate your accounts
- Group practice finances
- Rocky’s advice to private practitioners
The concept behind profit first
Everyone says sales minus expenses equals profit. The problem there is that profit is the leftover, it’s an after-thought. Mike [Michalowicz] … created a new formula, he said, “sales minus profit equals expenses” … pay yourself first, that’s what this is all about. (Rocky Lalvani)
Paying yourself profit first allows you to:
- Receive your income and sustain yourself, which sustains the business
- Put money aside for tax
Most businesses are unaware of how profitable they are and they spend their money each month, thinking there is less than there actually is.
Therefore, when the time comes to pay tax, business owners see how profitable the company was. However, there is no money left over, and they are stuck with the tax bill. These are the problems that the philosophy behind putting your profit first solves.
[Profit first] creates a system that works the way entrepreneurs work and allows them to have better control over their cash. (Rocky Lalvani)
Differentiate your accounts
All the money that comes into your business goes into an income account. On a regular reschedule, allocate the money available in this account with purposes into accounts such as:
1 – Profit account
2 – Owner’s pay account
3 – Tax account
4 – Whatever is left is allocated to the operating account
Part of the use of the profit account is to build up a vault account in your business so that when you hit the bumpy times you have extra cash in your business to handle it … owner’s pay is you getting paid for the work you do, but not for the reward of owning a business, so we separate the two. (Rocky Lalvani)
Differentiating between your accounts takes the emotion out of handling your money. By giving each dollar a job, it makes it easier for you to feel comfortable removing money from your business.
Group practice finances
- How is the group practice getting paid, and what is the delay?
- Are you collecting income appropriately?
- Who is determining your prices? You, or your insurance company?
- Seek clarity on where your profit is coming from.
It’s taking time to figure out where are your pools of profit, where are your highest value clients, and then shifting your practice to serving them. (Rocky Lalvani)
Design and build your company to be highly efficient. Do not chase money because by focusing on constantly doubling income you can fall into inefficiencies. Cut your costs first before trying to boost income.
Rocky’s advice to private practitioners
Start with baby steps. Open one bank account and put one percent of your revenue into it each month. After a couple of months look at what that money turned into, and then double it and take two percent. Over time you will start to build significant profit.
Books mentioned in this episode:
Useful Links mentioned in this episode:
- Go to SimplifiedSEOConsulting.com/joe and schedule a call with their team
- Visit the Profit First website
- Listen to Richer Soul and The Profit Answer Man podcasts
- Connect with Rocky on Facebook, Twitter, Instagram, and LinkedIn
Check out these additional resources:
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Meet Joe Sanok
Joe Sanok helps counselors to create thriving practices that are the envy of other counselors. He has helped counselors to grow their businesses by 50-500% and is proud of all the private practice owners that are growing their income, influence, and impact on the world. Click here to explore consulting with Joe.
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