“Profit-first” is a financial management strategy that prioritizes setting aside profit before any other expenses are paid. The idea is that by prioritizing profit, businesses are more likely to be financially stable and profitable in the long run.
The profit-first strategy involves the following steps:
- Determine your target profit percentage: Decide how much profit you want to make on each project or in each month, and set a target percentage.
- Allocate funds to profit: Set aside a percentage of your revenue for profit first, before allocating any funds to expenses.
- Allocate funds to expenses: Once profit has been allocated, the remaining funds can be allocated to expenses.
- Adjust expenses as needed: If there is not enough money to cover expenses, the business may need to cut back on expenses or increase revenue.
Freelancers should consider using the profit-first strategy because it can help them prioritize profitability and avoid overspending. By setting aside a portion of their revenue for profit first, freelancers can ensure that they are making a profit on their work, even if they have a slow month or unexpected expenses. Additionally, by prioritizing profit, freelancers can avoid falling into the trap of constantly reinvesting all their earnings back into their business and neglecting to pay themselves a fair salary.