Stop the Madness 

You have worked hard to build your business, you have grown sales, increased revenue, heck, you may even have more money coming in than ever before. So how is that you are still swimming in debt, have trouble managing your cashflow, struggle to pay your taxes and are no closer to your goal of financial freedom? That’s a stressful place to be, and we see it every day. But it doesn’t need to be that way. There is a better way and we call it the Profit Wise Formula. 

New Rules For A New Game 

The old rule is Sales – Expenses = Profit. The math is simple and intuitive, and just about every entrepreneur knows that formula. Here’s the problem: It is outdated and goes against human behavior. It also inhibits the growth of your business! The equation is a key part of why so many young businesses fail. Instead, let’s rewrite the rule to: Sales – Profit – Owner’s Pay- Taxes = Expenses. By doing so, we force ourselves to manage expense with incredible scrutiny while putting the needs of the owner first. By simply rearranging the old equation we now drastically change the outcome. 

Parkinson’s Law 

Parkinson’s Law is one of the best known and the most important laws of money and wealth accumulation. Author and historian C. Northcote Parkinson theorized that our demand for a resource increases to meet the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when we are given two days to do the same project it takes two days. That is why when given $10,000 to complete our work we get it done with $10,000 and when given $1,000 to complete the same work, it takes $1,000. The law also helps explain why most people retire poor. The law says that, no matter how much money people earn, they tend to spend the entire amount and a little bit more besides. Their expenses rise in lockstep with their earnings. This is often referred to as “Lifestyle Creep”. You are probably earning today several times what you were earning 10 years ago. But somehow, you seem to need every single penny to maintain your current lifestyle. No matter how much you make, there never seems to be enough. The more you earn the more you spend. Given enough time Parkinson’s Law will wreak havoc on your goal of Financial Freedom. 

The Pareto Principle (80/20) 

In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. Today this ratio is widely known as the 80/20 Principle popularized by Richard Koch’s 1999 book. Koch noted many companies found that 80% of their business came from 20% of their customers. His advice was to focus on “magic 20%” to achieve more with fewer resources. The Pareto Principle is a corner stone in the Profit Wise Formula. By applying the principle to your finances and focusing on a few critical decisions that will have long lasting positive effects. By focusing on getting a few big things right, the smaller things have a way of falling into place. 

Your Profit Partner 

By focusing on those things that matter most and by putting profits first. The Profit Wise Formula helps you implement ways to turn your cash eating monster into a profit-making machine. Are you ready to pay yourself first, manage your cash flow for profit, always have the money needed to pay taxes and become as much of a success at managing your money as you are at running your business? Let Thrive Wise Advisors be your Profit Partner. Let’s focus on what’s important and get your business earning profits immediately, so you never again have to worry about cash flow and true financial freedom can become a reality.