Profit First's "Smaller Plates" principle splits one operating account into six: operating, tax, owner's pay, profit, equipment, and team expenses. Like a smaller dinner plate that still satisfies, breaking up your money forces you to allocate for taxes, payroll, and profit before spending on anything else.
In this tip, I wanted to share with you a principle about Profit First called Smaller Plates. If you've read the original book Profit First, or if you read my book Profit First for Microgyms, both Mike and I talk about a study related to the plate size that Americans use with their food. And what they noticed is that Americans fill up their plates. And like most of us have been taught from our parents, we are encouraged to eat everything that's on the plate. So we do. They found that by shrinking the size of the plate, people still fill up the plate and they still eat all of it, and they feel as satisfied as they did with the bigger plates. So what does this principle Have anything to do with money. Think about the way you use your operating bank account. Most gym owners have one account and all the money flows into it and all the money, and that's the account that all the money flows out of, one account. So if you will, one large plate. Well, we have shown and seen With the Profit First method, that by having smaller plates set up, a gym owner is able to more— with more control, they're able to handle the flow of the cash. So each small plate has a specific purpose. Some people would call this spending your money on paper first. So what are some of these smaller plates? Yes, you're going to keep your operating account because you need operating— you have operating expenses, you need an account for that. But there's also a small plate for tax because as your gym gets more profitable, there is going to be a tax burden, and that burden should be on the business and not you as an owner. So there needs to be a smaller plate for the tax burden of the gym's profitability. There needs to be an account for your pay. We call it owner's pay. At the end of the day, you are the most important employee of your business, and you want your most important employee to feel like they're paid, and they— which helps them enjoy coming to work. Because honestly, if you don't enjoy coming to work, You don't have the ability to save humanity with your gym. Another one is profit. As an owner, you should get a return on your investment into, into your gym. So setting up a profit account that you use to give yourself profit distributions once a quarter is something that we really like. Specifically for micro gyms, We encourage having a small plate for equipment, equipment repairs, new equipment, and we also encourage having a smaller plate for team members' expense. There you have it. Those are the smaller plates of Profit First. In the book Profit First for Microgyms, I go into much more detail of every, every account and the way money flows in and out. If you've enjoyed this tip or got something out of it, please share it with a friend, and also please subscribe to our YouTube channel. Thank you. Have a good day.
