E323: The Dangers of Reinvesting 100% of Your Profits Back Into Your Business & The Benefits of The “Profit First” System
Entrepreneurs don't start an ecommerce business with accounting as their first priority.
Unless they're an accountant, or if they're really into numbers, there's simply just more exciting things to look forward to in ecommerce, whether it's launching a new product or brainstorming launch strategies to get more and more sales. It's only human to go after the more exciting things in business.
However, as entrepreneurs, we can't ignore the numbers forever. At some point, we'll be looking at our sales reports for the quarter and worrying about whether we paid that one SaaS program, or that trusty supplier, when in reality, the sales reports for the quarter were actually fantastic. I know I'm not the only one that's felt that way.
So today on the podcast, I brought on my dear friend Isaac Smith from Summit Ecommerce to talk about his personal experiences with accounting and some of the struggles that he's been through because of it. It just goes to show how important it is to look at your numbers on a constant basis, and why we as entrepreneurs, should ignore it no longer.
Here's a list of topics that we talk about, with timestamps:
- 5:22 –– How Isaac and I met, and how this episode came to be.
- 7:04 –– Accounting in ecommerce, and why you shouldn't ignore it anymore.
- 8:56 –– Why Isaac prioritises his bookkeeping, and some of the experiences he went through.
- 9:42 –– The breaking point when Isaac knew he had to get an accountant.
- 10:45 –– Some real life examples of the stress caused by not knowing your numbers.
- 11:38 –– Where it got really painful for Isaac.
- 14:33 –– The differences between Isaac's accounting and his bookkeeper's accounting.
- 16:41 –– The things that Isaac looks for to get a good understanding of your business.
- 17:41 –– Why it's important to know your profitability by SKU.
- 20:19 –– Why most entrepreneurs ignore their numbers, and the dangers of going 100% all the time.
- 22:45 –– The most dangerous outcome of not knowing your numbers
- 26:44 –– Why you should reward yourself and not put 100% back of your profits into the business all the time.
- 27:08 –– The “Profit First” system and how it can protect your business.
- 29:14 –– How I handled debt back in the days of ColorIt.
- 30:08 –– A case in support of putting 100% back into the business.
- 33:08 –– The benefits of the “Profit First” system.
If you guys are interested in the Summit that Isaac and I were a part of earlier this year, or Isaac's podcast, head over to surviveandthriveecommerce.com to see recordings of great entrepreneurs give their talks.
If you want to learn more about cash management and need help in learning the books of your ecommerce business, Isaac is holding a special cash strategy session that'll give you 3 actions to survive this pandemic for absolutely free.
If you have any questions for Isaac, you can contact him through his email: firstname.lastname@example.org.
We're holding a special Public Q&A Webinar on July 15th, 10am PST where you guys can ask us any ecommerce related questions about your businesses or our businesses! Sign up now to secure your seat and the opportunity to ask your questions live during the webinar!