In this monologue, the speaker addresses the problem of seasonal revenue fluctuations and the tendency to overspend when cash is abundant (Parkinson's Law). He explains how the Profit First system can mitigate cash‑flow gaps by allocating a fixed percentage of revenue to distinct accounts—owner’s pay, profit, and operating expenses—creating built‑in buffers during high‑income periods. He illustrates the concept with a tax‑firm example where quarterly revenue ranges from 22% to 28% of annual income, showing how the percentage‑based allocations preserve cash for slower months. The speaker also recommends adding a dedicated “slow‑season” bank account to further smooth cash flow, and shares his personal practice of using the owner’s pay account as a buffer to meet personal commitments during low‑revenue periods. Finally, he references his book Profit First for Microgyms, encourages reviews, and ends with a motivational reminder that profit is a deliberate choice.
Chapters
Hi, is there a way to smooth out seasonal revenue, or at least minimize the potential negative impact of it? Because what happens is when we have seasonal revenue, we often spend money. Our human behavior is to spend the money available, right? Parkinson's Law. The money's there, it's available to spend, we likely will. And then in the non-seasonal months, when we still have a certain amount of expenses, our income likely won't cover it. So with the Profit First system, it solves this problem for us. Uh, from a standpoint of actual business, uh, there are ways to smooth out seasonal revenue. You figure out how to get revenue during the off-seasons. Maybe that's an additional program— usually it is. Um, maybe it's upselling customers to I mean, it really depends, but we live seasonal revenue with— in our tax firm. Like, it might not seem like a big amount of difference, but it is. Like, in the first quarter, we typically have 28% of our revenue, then it's 26%, and then the last 2 quarters of the year, 22%. And so while we're all in the 20s, I'm telling you, the difference between 28% and 22% can be significant. And so with the Profit First system, because we're using percentages, um, this helps. But that being said, we can look at the other accounts in the Profit First system, like owner's pay, profit, and even your operating expense account. They become holding buckets so that in the really big months of the influx of cash, the balance in these accounts increases. We do not want to use all of that increase, right? Um, and so that by doing that, by doing the profit-first system, putting percentages into the different accounts, when it comes time to have our lower season when we have not a lot of cash and sometimes no cash coming in, we have a buffer that's already in these other accounts because we set aside the percentage of revenue when the cash was good. That's one of the beauties of the percentage system that we're using with— within the Profit First, um, management system. Um, another option you could do is you could have a separate account. Profit First headquarters teaches us this: when in doubt, add an account. You could have a separate, like, uh, slow season bank account. And you could put money there, and then when the slow season happens, you can distribute the money out of the slow season account into the other ones. So there's a couple ways to do it, but that's the best way to minimize it. I mean, as an example, with a lot of our income coming in during tax season, and then we have a lot of slower months— I mean, we have some really, really slow months— by having a buffer in my owner's pay account I'm able to always pay myself, at least I can pay my wife the amount of money that I've committed to put into our personal account every month. Because there are months that we have as a firm where the percentage that comes to my owner's pay isn't a dollar amount high enough to make that commitment or keep my commitment that I've made to my wife. But on the big months, it's, uh, there's more than enough. So anyways, I use my owner's pay account as a buffer. Um, I do talk about this a little bit in my book Profit First for Microgyms, so feel free to check that out if you haven't. If you have checked it out, we love reviews. It really helps us. Um, the more reviews we get, the better, uh, visibility Amazon gives us, which means there's a more chance, a better chance that more people can benefit from the knowledge I put in that book. Okay, hope that helps. Remember, profit is a choice. Have the courage and wisdom to choose it.
