Unlocking Profitability: The Naked Truth of Business Finances
Are you brave enough to look at the real numbers behind your business? In this episode, we’re diving into “The Naked Truth” from chapter three of Profit First—a must-listen if you’re ready to get honest about your finances and build a business that’s truly profitable.
I’m Deb Halliday, Profit First Professional and trainer, and I’ll be guiding you through the importance of facing your business finances with clarity and confidence. It’s not about how big your turnover is or how many people you employ—it’s about how much profit you actually keep. As Mike Michalowicz says, real success is measured by profitability, not just revenue.
We’ll explore the concept of the instant assessment—a simple but powerful tool that works like a financial X-ray for your business. I’ll show you how to compare your actual figures (revenue, profit, owner’s pay, tax, and expenses) with the Profit First benchmarks, so you can spot where money is leaking out and where you need to take action.
This episode is all about helping you get a clear, honest picture of your financial health and giving you the confidence to make positive changes. I’ll share practical steps and relatable stories so you can see exactly how to use the instant assessment to move your business towards greater sustainability and peace of mind.
Takeaways:
- Why profitability matters more than turnover or business size
- How to use the instant assessment to get a transparent view of your finances
- The importance of comparing your numbers to Profit First targets
- Simple, actionable steps to plug financial leaks and build a healthier business
Links mentioned:
financiallyhealthybusiness.co.uk
debhalladay.co.uk
Companies and resources featured:
Accounts Ladies, Accounts Office, Xero, QuickBooks, HMRC
Transcript
Welcome to Profit first with Deb Halliday.
Speaker A:That's me.
Speaker A:I'm Deb.
Speaker A:I'm a Profit first professional and trainer, author of how to Build a Financially Healthy Business, founder of the Accounts Ladies, an award winning accountancy practice and the Accounts Office training Academy.
Speaker A:This is the show for business owners who want to stop stressing over money, keep more cash, pay themselves more and build a business that truly thrives.
Speaker A:Just a quick note, Profit first is a licensed methodology.
Speaker A:Everything here is designed to help you implement it in your own business.
Speaker A:If you're interested in helping others with Profit First, I'll share how you can apply to become certified too.
Speaker A:Let's get started because your business should work for you, not the other way around.
Speaker A:Hello and welcome to Profit first with Deb Halliday.
Speaker A:I'm Deb Halliday, your Profit first professional.
Speaker A:And today we're diving into chapter three of Profit first, the Naked Truth.
Speaker A:This episode is about facing your business finances without fear.
Speaker A:It's not always pretty, but it's the key to profitability.
Speaker A:Let's do this.
Speaker A:In the uk, we, we love to ask and how big is your business?
Speaker A:How many employees?
Speaker A:How much turnover?
Speaker A:But Mike Michalowicz says that's the wrong question.
Speaker A:In chapter three, he argues the only question that matters is how profitable is your business?
Speaker A:Size doesn't equal wealth.
Speaker A:A 1 million pound turnover means nothing if you're drowning in debt or can't pay yourself.
Speaker A:The tool to face this truth is the instant assessment.
Speaker A:It's like a financial X ray showing where your business bleeds cash.
Speaker A:You compare your actual numbers, revenue, profit, owner's pay tax and expenses to profit first.
Speaker A:Target percentages.
Speaker A:Let's walk through it.
Speaker A:Grab your last 12 months financials.
Speaker A:Your accounting software like Xero or QuickBooks can help.
Speaker A:I'm going to use small numbers so it's easy to understand and you don't get number blindness.
Speaker A:Step one, note your top line revenue, say £100,000 for a Cardiff bakery.
Speaker A:Step two, subtract material costs like flour for the bakery to get real revenue, maybe £80,000.
Speaker A:Step three, list your actual profit owner's pay tax and operating expenses.
Speaker A:Maybe you kept £2,000 profit 2.5%, paid yourself £20,000, set aside £10,000 for tax and spent £48,000 on expenses.
Speaker A:Now compare to targets for an £80,000 real revenue business.
Speaker A:Profit first suggests 5% profit, 50% owners pay 15% tax and 30% operating expenses.
Speaker A:The gap.
Speaker A:Your bleed shows where to improve.
Speaker A:What if my numbers are awful?
Speaker A:Don't panic.
Speaker A:Mike shares stories of entrepreneurs in worse spots, like a business owner with 15 million pounds revenue but no furniture.
Speaker A:The instant assessment is your starting point, not your destiny.
Speaker A:In the uk, high taxes and VAT make this step critical.
Speaker A:You can't ignore hmrc, but you can plan better.
Speaker A:Consider James, a freelancer.
Speaker A:His turnover was £90,000 but his instant assessment showed 0% profit, 20% ors pay 10% tax and 70% operating expenses.
Speaker A:He was shocked.
Speaker A:70% on expenses like software and travel was unsustainable.
Speaker A:We set targets 5% profit, 50% owner's pay 15% tax, 30% operating expenses.
Speaker A:James cut his co working space and unused subscriptions, saving 10,000 pounds annually.
Speaker A:Six months later he had 4,500 pounds in profit and paid his VAT before the deadline.
Speaker A:Your Action step Complete the Instant Assessment.
Speaker A:Download the form from financially healthy business.co.uk it takes 20 minutes but changes everything.
Speaker A:Next episode we'll explore chapter four choosing your own profit first adventure.
Speaker A:Subscribe now for the next episode to make Profit first work for you.
Speaker A:Thanks for tuning in to Profit first with Me, Deb Halladay.
Speaker A:If you found today's episode helpful, please subscribe, leave a review and share it with another business owner who needs to hear this.
Speaker A:For more resources, courses and to connect with me, head to debhalladay.co.uk and remember, when you put profit first, you build a business that reduces the stress while it supports your goals and dreams.
Speaker A:See you next time.
Speaker A:SA.
