Can Profit First work for start-ups?

cash burn rate cash flow profit profit first profitability small business owners startups

Quick answer: YES!

Medium answer: YES!

Long answer: YES!

That's how passionate I am about the answer to the question I get asked often ... can Profit First really work for start-ups? Not only can it work, but also it actually sets the company up for healthy financial habits for the owners from Day 1 of bringing in revenue.

Right now, I am working with a very cool lady who had the foresight to -- after hearing about Profit First on a podcast and then reading the book -- implement Profit First from the very first day their blowout bar would open its doors. Two weeks ago they opened their doors. Last week they ran their first payroll ... no fuss, no stress ... they had already made Profit First allocations and had the payroll sitting there in a separate account. I am so happy for my client because she has made this super smart decision to run the cash flow of the business using the Profit First methodology. I said to her "I'm so happy for you ... I only wish that more startups and young companies have your foresight to implement Profit First from the early days too."

Another client of mine is building four different companies at the moment and all of them have long product development pipelines -- some of them will be in the pre-revenue stage for a couple to a few years yet.

He resisted the idea of implementing Profit First because at first blush it doesn't really make sense does it .... how can you implement Profit First if you aren't profitable?

So, here's my viewpoint on that ... even if you are investing in a pre-revenue company, Profit First still builds the muscle of allocating dollars to different accounts, of setting up the financial habits of budgeting through the use of "small plates". By building this muscle or this habit, the minute the first dollar comes in the door you will be on a path to permanent profitability. How great is that?

Most businesses fail because they run out of cash. Setting up the healthy financial habits before the first dollar is in the door can improve the odds of success substantially.

I realise this is a bit of a counter-point to the VC or Angel investing model where the mantra is grow, grow, grow and don't worry about profit because someday it will all be worth it because someone will buy-out the original investors based on top-line revenue. But what if you could do all of that, while also managing the cash flow in a smarter, more sustainable manner? That's what Profit First for startups allows us to do.

The energy brand-new companies is so infectious and I just wish more of them could have success through managing their cash flow burn rates. You've read the statistics on startup failures ... wouldn't it be great if your startup was one of the success stories because you never ran out of cash?

If  you are in the first three years of being in operation -- or maybe you are still in the planning stages and haven't even brought in your first dollar of revenue -- let's chat. Let's help you build that healthy financial habit of being profitable right from the outset so that you can pay yourself what you are truly worth.