In this episode, Annette Ferguson takes you beyond the basics of Profit First and into the advanced strategies you need to scale your business past the £500,000 revenue mark. If you're an established business owner looking to level up your financial game, this episode is packed with actionable advice for evolving your Profit First system as your business grows.
Key Takeaways:
• Your Percentages Must Evolve: Learn why the Profit First percentages that got you to £100k won't work for £500k and beyond, and what the key revenue milestones are for reassessing your allocations.
• Strategic Hiring is Non-Negotiable: Discover how to use Profit First to support strategic hiring, avoiding the common mistake of letting payroll balloon and erode your profitability.
• Systems are the Key to Scalable Profit: Understand why "winging it" is no longer an option at this level and how to build robust, scalable financial systems on top of your Profit First foundation.
In This Episode, You'll Learn:
• 5 Advanced Profit First Strategies: A deep dive into adjusting your percentages, handling multiple revenue streams, strategic hiring, tax optimisation, and building scalable systems.
• Real-World Case Studies: Learn from the experiences of other business owners who have successfully navigated the challenges of scaling with Profit First.
• How to Be Proactive, Not Reactive: Shift your mindset from simply managing your finances to strategically planning for growth and profitability.
• The Importance of Professional Guidance: Understand why working with a Profit First professional becomes even more critical as your business scales and your financial situation becomes more complex.
Resources Mentioned:
• Book a Call with Annette & Co: https://www.annetteandco.co.uk/fitting/
• Profit First for UK Business Workshop £27: https://www.annetteandco.co.uk/profit-first-for-uk-business/
Episode 557 Transcript: Advanced Profit First - Scaling Beyond £500k
Host: Annette Ferguson
Podcast: Financial and Lifestyle Freedom for UK Business Owners
Welcome to the Financial and Lifestyle Freedom podcast with me, Annette Ferguson. The episode you're going to listen to today is from a Facebook live that I did all around advanced profit first strategies for scaling beyond 500,000 revenue. Now even if you're below this revenue, there are going to be some key takeaways in this session. So don't discount it purely on that basis. I really hope you enjoy. And if you do, please do remember to subscribe to the podcast in whichever player you happen to be listening in. And it would mean a vast, vast amount to me if you can also leave us a review. Here's the episode.
Welcome, welcome. I'm so glad that you could join me here today. Let me ask you something, who's been using profit first? And have you seen the power in paying yourself and allocating money with intention? But here's the thing, the question is, what happens then as your business starts to grow, and things start to change? What happens when you say, hit the 500k a year mark, and you're scaling fast, things can get a little bit more complex. And so that's what we're going to speak about today, we're going to speak about evolving the profit first system as your business grows and evolves. I'm going to share with you some more advanced strategies for profit first in your business, for kind of more established businesses and businesses as they grow. So if you are ready to level up your financial game, then you are in the right place today.
Now for those of you that don't know me, if you're tuning in, you're wondering who I am. My name is Annette Ferguson. I am CEO of Annette & Co, UK based accounting firm. We are chartered accountants, certified profit first professionals, and financial strategists. And we support businesses to businesses and business owners to take home lots more money from their business for them and their families to enjoy.
And before we get into the nitty gritty of today's session, I want to do a quick check. It is Tuesday, we are live and we are talking about growing our business in a financially healthy way. So in the comments, I would love you to tell me on a scale of one to 10, how ready you are to level up your business. One being I'm still trying to figure out the basics and 10 being I am so ready to scale. Give me all the things I need to know all the things. So I would love to know in the comments where you are on that scale. And even if you are tuning in on the replay, I would still love you to comment and let me know on that as well. It will help drive content for us in the future, it will help me support you the best. And it's always amazing to hear from people who are tuning in and watching as well. Because it is fantastic to see you all here, it's great to have that energy and that readiness to grow and scale your business as well. Because scaling isn't just about doing more of the same, it's about thinking differently. It's about being proactive and not reactive. And that's some of the stuff that we're going to cover today in our session together.
1. When to Adjust Your Profit First Percentages
So let's dive into our first big topic on this when to adjust your profit first percentages. This is the question I get all the time, you know, my revenue is doubled, should I be changing my percentages? Well, the short answer is yes, absolutely. The percentages that got you to an 100k revenue are not the same ones that are going to get you to a 500k and beyond. As your revenue grows, your business finances need change overall, and that includes your profit first percentages. And your operating expenses, they might increase, your tax liabilities will certainly change as your revenue and your profitability grows as well, not to mention your own income goals will evolve over time as well.
So the natural next question then becomes, what are the trigger points for this? And we often think of these in revenue milestones, just because it's easier to do that. So what we might want to think about are those certain trigger points. For example, once you cross 100k, 250k, 500k, these are trigger points that you might start to think, okay, let's, let's think about reassessing these, so that we can move the business forward at the same rate. Okay, so those are the ones I would recommend that you do a big reassessment on 100, 250, 500, 750, and a million. Most people watching it and tuning in will be within that range. So those are the ones I'd recommend you do a deeper dive, and you really review your financial goals, your aims, all of those things, so that you can align those with the business.
Because once you get up to say the 500k stage, you're likely to be hiring more team members, potentially investing in more robust systems, and your tax planning will start to become more critical as well. So we'll talk about that in a bit. But I want to give you an example, a quick sort of client case study of an example of a client that we worked with. Let's call her Jillian. She runs a successful digital agency. And when she first came to us, she was at the round about 300k revenue mark, her percentages were still set for really a smaller business about 100k type business. And she was feeling really squeezed. She was struggling to get the percentages to work, it seemed like there wasn't enough money for everything. So we sat down and reviewed her numbers with her and adjusted her allocation percentages. We actually slightly decreased her operating expenses, and we carved out a specific allocation for team and team growth. And the result was that she started to feel back in control. She had money as she needed as her team was expanding. And she had more clarity then on what she could afford to spend on that while still taking consistent profit for herself as well. So this isn't about being restrictive, it's about being intentional, as profit first always is. It's always about being intentional. It's about understanding your financial goals in your business, and for you personally, and aligning your business's finances to those goals.
2. Handling Multiple Revenue Streams
So let's talk about something that then happens with a lot of businesses as they scale, they add more revenue streams. For anyone that's seen much of my content, you will know that I really don't recommend multiple revenue streams under 100,000 pounds worth of revenue. And it's just because when you are building a business at that level, it needs all your energy in one revenue stream in order for that to be successful before you can get it to a stage where you can perhaps afford to spend some automation on it or team supporting you. And if you start adding lots of revenue streams below that level, you dilute the message and you do dilute the time available to you to grow and focus on that revenue stream.
But as we start to grow and scale our businesses, then often we can add more revenue streams in there. You've got a core service just now and you decide that you're going to add on a digital course or a membership or something like that. And they can be great for growth, but do remember that they will take time, your time away from your core offer. So you have to make sure that that is going to be right for the business and as I say for your financial goals.
But let's say that you have done that. Sometimes business owners that do this can start to feel like their finances feel a little bit messy. They got stuff coming in from different places at different times and with different profit margins ultimately as well. And so how do we handle all of that within Profit First? And does it even matter from a Profit First perspective? Well what some people do in this situation is they actually have two income accounts so that they feel like they can get a handle on when the money is coming in and the rhythm of the money. Now that may not work in all situations because it will depend on how you're collecting funds. But for some business owners that can be really helpful to have two separate income accounts so that they can get the cadence of the cash coming in and they can potentially also allocate profit for example in a different percentage from the different sides of the business if one is more profitable than the other. Of course that also creates complexities around overheads and where you pay those from and things. But for some businesses this can be really helpful as well.
For example we had a client Mark who was running a software company and he has a SaaS product as his main product but he also did some custom development work. So these people paid differently, they paid in different ways. So the SaaS product that was collected through Stripe and that was processed that way but the custom development work that was paid through bank transfer so it was actually relatively straightforward for him to have the income coming into two separate places and he was able to monitor that better. He felt that that gave him some better control over the cash and understanding which side of the business was supporting his business the best. He discovered that of course the custom work was where he was making his profit and therefore it allowed him to strategically increase prices for kind of custom development and invest in more marketing in that side of the business because it became a bit clearer to him what was happening.
Now even if you don't have two income accounts you should of course be tracking this in your transaction management and making sure that you understand the margins there but some people prefer to also mirror that in their profit first setup as well.
3. Strategic Hiring Without Sacrificing Profit
Now here's another one. If you're scaling you're busy and you need to hire usually but how do you do that without sacrificing profit? Well here a lot of business owners can get stuck because a big problem that we often see is that people hire actually too quickly. Their payroll balloons and suddenly all their profit is gone and this happened to me too. I did exactly this. I hired too quickly, I got tons of people in at the same time for all areas of the business so across marketing, sales and operationally I did a big recruitment drive and my payroll ballooned and actually everything else didn't catch up at the same time and it eroded profitability and we had to reverse a little bit and work through that because the key here is to be strategic and you can use profit first to support hiring.
So before you even think about hiring you want to have a dedicated payroll bank account pot or space. To me this is a complete non-negotiable and the payroll account is essentially partly funded by what would have been in operating expenses and then making sure you have a clear budget for what your payroll expenses will be. You need to map this out. You need to do a profit plan which is a forward-looking cash projection for the business to understand when you actually can afford to hire without impacting negatively your profitability. So thinking about that and also thinking about hiring based on where your business is headed as well. So you need to know both these things and you can't do that without a forecast. So understanding those so that you can understand when your business can hire and understanding the balance between payroll and profit because a healthy business should be able to afford both those things. It's not an either or. It's not reducing your salary to take other people on and if you're finding that you cannot afford to hire without sacrificing your profit or your owner's pay then you need to be looking at your pricing and your efficiency in the business. Are you charging enough for your services? Are there inefficiencies that your business can streamline? Don't just throw people at the problem which is exactly what I did and I learned from. Throw systems and strategy at the problem first and then work out what you need.
As well as this kind of going a little wonky in my own business, we also worked with a client that it did as well, a creative agency who was exactly in this situation when they came to us. They were desperate to hire a new designer but their numbers just didn't support it. We worked with them to create a profit plan, a 12-month financial forecast where we identified some key areas that they could impact the revenue and increase their prices and whatnot. They also implemented some new project management software to help with the efficiencies and that meant that within six months they were able to hire the new designer and their profit margins actually increased as a result of all this work that was happening beforehand. They were being intentional and strategic and not just reactive to the feeling that oh my goodness we need someone else to help in the business.
4. Tax Optimisation for Scaling Businesses
So next let's talk about a favourite topic for many people which is of course tax. It is incredibly exciting and I realise that it's not necessarily the most fun thing for many people to talk about but as your business scales it's incredibly important that you understand what that means for tax purposes. Because ultimately the more you earn, whether that's your limited company or yourself personally or you're a sole trader, the more you earn the more you pay in tax. That is just a fact of life. Now we don't have to ever overpay tax but we will pay more so it's crucial that you're proactive and strategic in your tax optimisation and Profit First can help with that as well.
So the first thing of course that you need is a dedicated tax account but you actually need more than one because you need a personal tax account and you use a company tax account if you are a limited company and those of course should be getting funded consistently from your weekly or two weekly allocations. But it's not just of course about putting the money aside, you do need to be actively looking at ways that you can optimise your tax position as well. So that of course for the vast majority of people means working with a good accountant who understands both your business and Profit First and can advise you on things like tax efficient investments, pension contributions from your company, claiming things that you're entitled to, trivial benefits, use of home as office, all those good things. So we need to make sure that those are all going to be set up fully within your allocations so that you can contribute to these things as well to reduce your tax position. For example, making sure that within your allocations you're allowing for pension contributions is really important. Making sure that your business has the correct structure for tax is also important. Perhaps you need to move from a sole trader to a limited company in order to make yourself more advantageous for tax purposes but please don't assume that as a natural default. Make sure you do the numbers or get your accountant to do the numbers to work out which you are going to be in a better position to pay as little tax as is legally possible for you.
5. Building Robust Scalable Systems
So we've covered a lot of ground so far. We've talked about adjusting your percentages as you grow, handling multiple revenue streams, hiring team, optimising for tax, but how do you hold that all together? How do you maintain a laser sharp focus on profit as you scale? And the answer most of the time is systems. Building a robust scalable system that supports your growth and this is not necessarily an easy task either. Now your profit first system is a foundation but we want to build on top of that from a financial perspective and of course you want to be building systems operationally too. But building on your profit first for your financial systems, we also need to have clear financial reporting so you can see the numbers at a glance. If you are getting up to 300, 400, 500,000 pounds revenue and you are not getting bookkeeping done at least monthly, you're not able to see monthly management information, that needs to be assessed. That should be something that you're able to do on a monthly basis. Now of course that does require the business providing whoever is doing that with the information on a timely basis but you need to get into that routine and system of doing that so that you can have monthly management information, those clear financial reports to help you make data driven decisions in your business because once you get that level, winging it is typically not an option. So it means also having kind of regular rhythms of financial meetings either with yourself or with your accountant or with your team to review the numbers and make sure that you are on track. So that is really important as well.
So I've gone through it at quite a pace but I hope that some of that helps and you can ingrain some of those things in your business as well. If people have questions please do ask in the comments, I'm happy to take any questions on this topic, it's not a problem at all. So wherever you are tuning in today please, please do make sure that you ask any questions that you have on this as I say in the comments because remember scaling your business is a journey, it's not a destination and you ultimately don't have to do it alone. Of course if you are ready to scale strategically and you want support to do that then we are here to help you do that. There is a link in the description to this video where you can book a call to discuss exactly that with me. I also have the URL on the screen for you too if you want to speak about getting profit first in your business, implementing profit first, whatever stage of implementation you are on, tweaking the system for you and your business and getting support to do that to support your long-term sustainability and profitability. Then please do, please do book a call I would love to speak to you about that as well.
Now I don't see any questions coming through in the comments but as I said I'm happy to answer those if you have any so I'll give it another minute or two, well hopefully somebody is frantically typing away in the comments but I understand if you are a little shy to discuss these things in public, sometimes people are so you know happy to receive any messages as well privately on this too.
But I do thank you so much for tuning in and joining me today, I know your time is incredibly precious so I massively appreciate you spending some of it with me. I hope that you have found today's session valuable as well. Now next week we will be back again, it will be our session next week, we will be back to the 12 o'clock time too and I'm going to do a longer Q&A session next week so if you do have any questions that you want answered in that please, please do ask in the comments, please feel free to send me an email, you can do that by emailing admin at annetteandco.co.uk so let me just pop that on the screen, admin at annetteandco.co.uk, you can pop an email over to me with any of these questions that I can then, I will then answer those live next week as well.
A hunger within is saying, do you only do tax planning? No we don't, we work with small businesses to do accounts, tax, payroll, VAT, we do cash flow forecasting, profit first support, so we do all the numbers stuff, bookkeeping, fat returns, payroll, we do all the numbers stuff in your business so I'm happy to discuss any of that with you. As I say, you can book a call, the link is in the description or you can drop me an email as well, that's no problem at all because remember profit is not an afterthought, it's a choice and we want to make sure that we are always choosing a profitable business because if our business is not profitable, ultimately it does not exist for that long and it means we cannot support anyone including ourselves, so you have the power to choose profit every single day, I hope that you can, you can work towards doing exactly that in your business so that you can continue in your business for as long as you want.
Hunger saying I have a good accountant but could do with some tax planning, happy to discuss that with you, that's no problem at all, as I say yeah book a call or pop me an email and we can happily have a chat about that on a call and see how we can support you.
Wonderful, it was lovely as I say to speak to you all today, I hope you have a wonderful rest of your week, I will be back at midday next Tuesday as well for our next session so I will see you all then. Take care everyone, see you soon.
