How to Use Profit First to Manage Your Photography Business Finances
Managing finances can be daunting for many business owners, especially those of us in creative fields who just want to make pretty things!
Up until 2021 I had no idea how to pay myself, in fact I didn't.
All the money just got locked away and I lived off what I made in my 9-5.
But when I moved to England and decided to make brand photography my main job, I knew I had to put more focus into paying myself and managing my finances responsibly.
And that's where the Profit First method, developed by Michael Michalowicz, came in to save the day! I'll be honest with you, I didn't read the book. I skimmed it in 2021 and watched one of his videos and hit the ground running from there!
The method is really simple to implement and thankfully prioritizes paying yourself and taking a profit as the business owner - how great is that?
Here's How I Implemented Profit First in my Photography Business
It may sound daunting at first but I promise this is worth it!
These are the exact steps I took to better handle my finances.
Open Separate Accounts
To begin, set up multiple bank accounts:
In one bank (I use Starling) open 2 accounts that allow you to have separate 'pots' or saving spaces:
Operations Account: Where all income is deposited and tied to your debit card (base account).
Create 2 saving spaces in here:
Profit
Monthly Income
Personal Account: To pay yourself.
In another bank (I use First Direct) open:
Tax Account: To save for taxes.
Determine Your Percentages
Decide how much of your income will go into each account. A popular allocation is:
5% to Profit
15% to Taxes
50% to Salary
30% to Operations
You can adjust these percentages according to your needs. If you do, update the formulas in your spreadsheet so it does the math correctly for you!
Transfer your Transactions
This will feel like a headache if you have loads of transactions monthly but each time money comes into your operations account, manually move it into the "Monthly Income" saving space or pot.
Record Your Monthly Income on your Spreadsheet
On the first of each month (or whenever you want to pay yourself), pop your total income from the previous month into your payday spreadsheet and let the formulas do the work to determine how much money you need to move and where it's going.
Now it's time to Pay Yourself!
Transfer all the money from your "Monthly Income" pot back into operations after you've recorded the total amount in your spreadsheet.
Now you can start moving the funds calculated on the spreadsheet to each of your designated accounts based on the percentages you’ve set.
Move 5% to the profit pot (don't touch it until the year or quarter is over - whatever you prefer as a gift to yourself)
Transfer 15% to the tax account (and never look at it)
Send 50% to your personal account for your salary
Then 30% will remain in your operations account for you to use on expenses throughout the month
Regularly Review and Adjust
Monitor your accounts regularly and adjust your percentages if necessary. For instance, if you want to invest in a course, consider increasing your operational expense percentage temporarily.
If you need to raise your salary a bit, do that as well, as long as you've put money aside for taxes and can happily cover all your operational expenses.
Final Thoughts
By following these steps, you can streamline your business finances and make sure you are ALWAYS paying yourself and have money set aside for taxes. And if you're thinking, "I don't make enough to worry about taxes yet," save it anyway. And if you don't have to pay when the time rolls around, treat yourself to something nice!
Ready to take control of your finances? Grab the Entrepreneurial Pay Spreadsheet I developed and have been using since 2021!
Watch how I do all this in the video below!
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