Stop Leaving Money on the Table: Ron Saharyan and the Power of Profit First

Want to grow your business and actually keep the money you make? Most entrepreneurs are great at generating revenue, but struggle when it comes to building a profitable business that supports their dreams.

In this episode of Growth Amplifiers, I talk with Ron Saharyan, co-founder of Profit First Professionals, about a revolutionary system that changes the way you think about cash flow. Profit First is a simple yet powerful methodology that helps businesses prioritize profit and achieve financial stability.

Ron’s background is fascinating. He’s a successful entrepreneur who, along with his business partner Mike Michalowicz (author of the book Profit First), developed this unique approach to cash flow management. They now certify accountants, bookkeepers, and coaches in the Profit First method, empowering businesses worldwide to take control of their finances.

Key Takeaways

• Profit is NOT a Leftover: Traditional accounting teaches us that profit is what remains after expenses are paid. Ron challenges this notion, arguing that this mindset devalues profit and leads to financial instability.
• The Power of Allocation: Profit First uses a system of dedicated bank accounts to allocate percentages of revenue for specific purposes (profit, owner’s pay, taxes, operating expenses). This creates “guardrails” that ensure you prioritize profit and build a financially healthy business.
• Embrace Systems: Just as you have systems for marketing and sales, you need a system for your cash flow. Profit First provides a clear framework for managing your money and achieving your financial goals.
• Don’t Fear Failure: Ron shares a personal story of a $30,000 mistake and emphasizes the importance of learning from failures. He encourages a culture of experimentation and continuous improvement.

Interview Highlights

The Problem with Traditional Accounting:

“Everyone understands sales minus expenses equals profit. Right. That the world is flat… What you’re doing there from a behavioral standpoint, you’re actually saying profit is a leftover. Profit’s no good.” – Ron Saharyan

Key Insight: By prioritizing expenses over profit, businesses often find themselves struggling financially despite increasing revenue. Profit First flips the script, putting profit first and transforming the way you manage your money.

The Profit First Solution:

“What we’re doing with businesses is taking that [envelope budgeting] methodology and allocating a predetermined percentage into a bank account. And the only thing you can do with that money is spend it on what that name of that bank account is.” – Ron Saharyan

Key Insight: By allocating funds for profit, owner’s pay, and taxes upfront, you ensure that these essential elements are prioritized. This creates financial stability and allows you to enjoy the fruits of your labor.

Overcoming Challenges:

“I’ve made tons of mistakes… The only way you can get better is if you make mistakes. It’s just like practice. If you’re an athlete… If practice is easy, you’re losing your edge.” – Ron Saharyan

Key Insight: Ron’s vulnerability and willingness to share his own mistakes highlights the importance of embracing challenges and learning from setbacks.

Final Thought:

“Do what you say you are going to do when you say you’re going to do it and do it 3% better than expectations. If you’re an employee, if you’re an owner, you do that, you live that lifestyle. You are a rockstar.” – Ron Saharyan