THE Profit First Podcast

What Is Profit First? A Simple System to Take Control of Your Finances

Welcome to This Week’s Profit First Accountant Newsletter! Estimated Read Time: 8 Minutes It’s Stephen Edwards from Gro Profit First Accountants, and welcome to this week’s Profit First Accountant Newsletter. INTRODUCING THE GRO ACADEMY Welcome to The Gro Academy—this is your introduction to Profit First. Now, this is designed for two types of people. Firstly, if you’re completely new to Profit First, the aim is that by the end of this, you’ll clearly understand what it is, why it matters, and how it can genuinely improve your business. Secondly, if you’ve decided to work with us, or you’re about to, then this is your starting point. We’ll be implementing this with you step by step, but what I want to do here is give you some quick wins so you can get started straight away. Either way, there’s value here. Because the reality is, most business owners don’t necessarily have a knowledge problem—they have a structure problem. They might be generating revenue, they might even be growing, but there’s no clear system behind the money. And that’s where things start to fall apart. That’s exactly what Profit First is designed to fix. THE STORY BEHIND PROFIT FIRST Profit First comes from a book by Mike Michalowicz. He built and sold a successful business for millions and believed he had the formula cracked. But when he reinvested into multiple businesses, everything went wrong. He lost the money. There’s a moment he talks about where his daughter gave him her piggy bank because things had got that bad. And that’s when he stepped back and asked: Where do business owners actually go wrong with money? What he discovered was simple but powerful: Turnover is vanity, profit is sanity. Just because your revenue is growing doesn’t mean your business is healthy. WHAT IS PROFIT FIRST? We’re all taught the same formula: Sales – Expenses = Profit On paper, it makes perfect sense. But in reality, what happens is: * Expenses come first * Profit comes last And when profit comes last, it often doesn’t happen at all. Profit First flips that: Sales – Profit = Expenses Now, at first, this can feel a bit unrealistic or even too simple. But if you think about it logically—especially if you were starting a business from scratch—it actually makes perfect sense. If your goal is to earn £40,000 and you expect to generate £100,000 in revenue, then naturally you’d say: That leaves £60,000 for expenses. That’s Profit First in action. THE REAL PROBLEM (AND WHY MOST BUSINESSES STRUGGLE) One of the biggest issues is behaviour. If you’ve got £10,000 sitting in your bank account, it feels like you can spend £10,000. So what happens? * Costs expand * Spending increases * Profit disappears This is why so many businesses—despite decent revenue—are still struggling with cash flow. In fact, the majority of businesses are surviving on some level, and cash flow is usually the core issue. Profit First addresses this by putting structure and boundaries around your money. HOW PROFIT FIRST WORKS (THE ENVELOPE CONCEPT) A simple way to understand this is the envelope system. If you had £500 personally, you might split it into envelopes for: * Rent * Food * Bills * Spending * Savings Each pound has a job. Profit First works the same way—but using bank accounts or pots instead of envelopes. When money comes in, you allocate it into different categories so you always know: * What’s yours * What’s for tax * What’s for expenses THE CORE ACCOUNTS (AND WHAT THEY MEAN FOR YOU) At a minimum, you should have: INCOME ACCOUNT All revenue comes in here. Nothing gets spent directly from this account. PROFIT This is your reward as the business owner. This is not your wage—this is a separate pot that builds over time and is typically taken as a bonus quarterly. OWNER’S PAY This is what you live on. It’s your regular income—the equivalent of a salary. TAX Money set aside so you’re never caught off guard by a tax bill. OPERATING EXPENSES This is what’s left to run the business. VAT (IF APPLICABLE) This should always be separate. Mixing VAT with your main account is one of the most common causes of cash flow stress. The key idea here is: Profit, Owner’s Pay, and Tax are all for you as the owner. Most people cover the first two. Very few consistently build a separate profit pot. HOW IT WORKS IN PRACTICE Let’s say £1,000 comes into your business. Instead of seeing £1,000 to spend, you split it. For example: * A percentage goes to profit * A percentage goes to owner’s pay * A percentage goes to tax * The remainder goes to expenses You do this weekly or fortnightly. And over time, this creates a rhythm. You stop guessing and start knowing. WHAT CHANGES WHEN YOU IMPLEMENT THIS Once this system is in place, your behaviour changes. You become: * More disciplined with spending * More aware of your numbers * More intentional with decisions We’ve seen businesses: * Become profitable for the first time in years * Save significant amounts very quickly * Grow while actually working less It doesn’t eliminate challenges—but it makes them far easier to manage. QUICK WINS TO GET STARTED TODAY If you’re not ready to fully implement everything yet, start here: 1. GO THROUGH YOUR EXPENSES Line by line. Ask: * Is this a must-have? * Is it a nice-to-have? * Or is it an investment that should generate a return? Most businesses will find immediate savings here. 2. START WITH 1% PROFIT Even just 1%. It’s not about the amount—it’s about building the habit. 3. SEPARATE YOUR VAT If you’re VAT registered, this is one of the biggest wins you can make immediately. 4. USE POTS OR SEPARATE ACCOUNTS Use a bank that allows multiple pots (Starling, Monzo, etc.). Keep it simple—but keep it separate. 5. MAKE PROFIT HARD TO ACCESS Move your profit into an account that isn’t easy to dip into. Out of sight really does mean out of mind. FINAL THOUGHTS Most business owners are working incredibly hard—but not always seeing the rewards. Some are: * Earning less than their team * Constantly worrying about cash flow * Waking up in the middle of the night thinking about the business Profit First is about changing that. It’s about creating a system that helps you: * Make more money * Reduce stress * Build a business that actually supports your life Because ultimately, that’s what this is all about. If you’d like help implementing this in your business, feel free to reach out: stephen@cheltenhamtaxaccountants.co.uk [stephen@cheltenhamtaxaccountants.co.uk] Until next week—keep putting Profit First. Stephen Edwards Profit First Accountant & Business Coach

Why Working Harder Isn’t the Answer to Scaling Your Business

Welcome to This Week’s Profit First Accountant Newsletter! Estimated Read Time: 4 Minutes Hi Everyone, It’s Stephen Edwards from Gro Profit First Accountants, and welcome to this week’s Profit First Accountant Newsletter. This week, I want to talk about why working harder isn’t the answer and how focusing on the vital few can completely transform your business. Most business owners think the answer is simple: work harder, work longer, and success will follow. And to be fair—there is a time and place for that. In the early days of building a business, I did exactly that. I was working 60-hour weeks, saying yes to every opportunity, doing whatever it took to pay the bills and get things off the ground. That level of effort can get you moving. But it won’t get you scaling. At some point, working harder stops being the solution—and starts becoming the problem. THE CEILING YOU DON’T SEE COMING I hit this myself when the business was around 30–40% of the size it is today. Everything went through me. Every client, every decision, every problem. And that’s when I realised: I’d built a business that depended entirely on me. That creates a ceiling. To grow, I had to: * Build a team * Empower people * Let go of control Not everyone liked it. Some clients even left. But it was necessary to create a business that could actually scale—and support the life I wanted. THE GAME-CHANGER: TRIVIAL MANY VS VITAL FEW Here’s the real shift. As a business owner, you’ve got endless options: * Books to read * Podcasts to listen to * Ideas to implement * Projects to start It’s overwhelming. But the truth is: Not everything is equally important. You need to distinguish between: * The Trivial Many – the majority of tasks that feel productive * The Vital Few – the small number of actions that actually move the needle This is where the Pareto Principle comes in. If you’ve got 10 key projects: * 2 of them will likely drive 80% of your results And those few activities? They can be up to 16x more impactful than the rest. WHY MOST BUSINESS OWNERS STAY STUCK The problem isn’t lack of effort. It’s lack of focus. Trying to do everything leads to: * Burnout * Overwhelm * Slower progress Whereas focusing on the vital few leads to: * Faster results * Better decisions * More clarity HOW TO IDENTIFY YOUR VITAL FEW If you’re not sure where to start, here’s a simple structure: 1. Define Your Vision * What does your 3-year future look like? * What needs to happen for you to feel successful? 2. Break It Down * What needs to happen in the next 12 months? * Then the next 90 days? 3. Focus Weekly * What are the few key actions this week that actually move you closer to that vision? That’s how strategic business owners operate. A SIMPLE MINDSET SHIFT You don’t need to: * Read every book * Listen to every podcast * Act on every idea Just like you can’t watch everything on Netflix… You don’t need to do everything in your business. You just need to focus on what matters right now. FINAL THOUGHT If you take one thing from this week, let it be this: Success doesn’t come from doing more. It comes from doing what matters most. Focus on the vital few—and everything else becomes easier. If you’d like help identifying your vital few or implementing Profit First in your business, feel free to reach out: stephen@cheltenhamtaxaccountants.co.uk [stephen@cheltenhamtaxaccountants.co.uk] Have a great week. Stephen Edwards Profit First Accountant & Business Coach

Achieve Business Freedom: Work Less & Earn More By 2026

Welcome to This Week’s Profit First Accountant Newsletter! Estimated Read Time: 4 Minutes Watch the Full Video here [https://youtu.be/Vg-OgspYJXk] It’s Stephen Edwards from Gro Profit First Accountants, and welcome to this week’s Profit First Accountant Newsletter. A lot of business owners start their journey because they want more freedom — more time, more flexibility, and more control over their lives. But what often happens is the opposite. The business grows, the workload increases, and suddenly the owner becomes the most overworked person in the company. Instead of having freedom, they feel trapped. So the big question becomes: How do you build a business that allows you to work less while still earning more? The answer lies in building the right systems and structure so that the business does not depend on you for every decision. THE REAL GOAL OF BUSINESS OWNERSHIP The real goal of business ownership isn’t just revenue growth. It’s about building a business that supports your life — not one that consumes it. Many entrepreneurs believe they need to be involved in everything for the business to succeed. But in reality, that creates a bottleneck. When the owner is the bottleneck: * Every decision needs their approval * Progress slows down * Growth becomes limited To achieve real freedom, the business must be able to operate effectively without the owner being involved in every detail. THE FOUR STAGES OF BUILDING A BUSINESS THAT RUNS WITHOUT YOU A useful way to think about this is as a progression through four stages. STAGE 1: BUILD THE FOUNDATION Before anything else, the fundamentals must be clear. This includes having a clear vision, understanding your numbers, defining your values, and creating the right team structure. Without these foundations, growth becomes chaotic rather than strategic. STAGE 2: BUILD THE BUSINESS SYSTEMS Once the foundation is in place, the next step is building systems. This includes: * A scorecard to track the key numbers that show if the business is healthy * A marketing system that consistently generates leads * Strong financial management, including profitability and pricing Profit First plays a key role here because it helps you stay in control of your finances and ensure the business is actually profitable. STAGE 3: REMOVE YOURSELF AS THE BOTTLENECK One of the biggest shifts happens when the owner stops being involved in everything. This often involves hiring an operations manager or implementing systems that allow the business to run smoothly day to day. Instead of focusing on delivery and operations, the owner can start focusing on higher-value activities such as strategy, leadership, or growth. STAGE 4: BUSINESS AND LIFE FREEDOM This is the ultimate outcome. When the right systems, team, and financial structure are in place, the business can operate successfully without constant involvement from the owner. Freedom might look different for everyone. For some people it means taking extended time off. For others it means working fewer hours or focusing only on the parts of the business they enjoy. But the key point is this: You have the choice. PROFIT FIRST TIP OF THE WEEK Do you have a clear financial dashboard? Your Profit First accounts give you a real-time view of the health of your business, but it’s still important to track key numbers regularly. A simple weekly scorecard should include: * Revenue and profit * Cash in the bank * Debt levels * Payroll as a percentage of revenue * Operating expenses Without tracking these numbers consistently, it becomes very difficult to make good decisions or correct course early. FINAL THOUGHT Working less and earning more isn’t about doing less work. It’s about building the right systems, team, and financial structure so the business doesn’t rely entirely on you. When that happens, your business becomes what it was meant to be: A vehicle that supports your life — not one that controls it. If you’d like help implementing Profit First in your business or building systems that give you more freedom, feel free to reach out. stephen@cheltenhamtaxaccountants.co.uk [stephen@cheltenhamtaxaccountants.co.uk] Until next week — keep putting Profit First. Stephen Edwards Profit First Accountant & Business Coach

Cashflow Problems? It Might Not Be What You Think

Welcome to This Week’s Profit First Accountant Newsletter! Estimated Read Time: 7 Minutes Watch the full video here [https://youtu.be/QhV-fnEnuyY?utm_source=the-profit-first-accountant&utm_medium=newsletter&utm_campaign=the-profit-first-accountant]. It’s Stephen Edwards from Gro Profit First Accountants, and welcome to this week’s Profit First Accountant Newsletter. “I’VE GOT A CASHFLOW PROBLEM…” This week’s newsletter is based on a real coaching conversation with a business owner. The business is growing. Revenue is up. The team is bigger. The numbers are larger than ever before. But cashflow feels tight. There’s pressure around: * VAT payments * PAYE * Supplier bills * Wages * Paying themselves And the natural conclusion is: “I’ve got a cashflow problem.” But here’s what I explained: Cashflow problems are usually a symptom. Not the root cause.   THE WARNING LIGHT ON THE DASHBOARD Think of cashflow like the warning light on your car dashboard. The light isn’t the problem. It’s telling you something underneath needs attention. When I reviewed 18 months of this client’s figures on our very first call, the picture became clear very quickly: Yes, cashflow was tight. But the real issue? The margins were too thin. And when margins are too thin, everything feels fragile. There’s no breathing space. No buffer. No room for mistakes. You’re one unexpected bill away from stress.   GROWTH MAGNIFIES WEAKNESS Here’s something most business owners don’t realise: Growth doesn’t fix financial weaknesses. It magnifies them. If your margins are tight at £500k turnover, they’ll be painfully tight at £1m turnover. More revenue means: * More payroll * More overhead * More tax exposure * More working capital required If the profitability engine isn’t strong enough, growth simply increases the pressure.   THE REAL QUESTION: WHY AREN’T YOU MAKING ENOUGH PROFIT? Once we established it wasn’t “just” cashflow, the better question became: Why is the business not producing enough profit? And this is where proper analysis matters. At Gro Profit First Accountants, when we do a Profit Assessment, we’re looking at: * Gross profit margins * Net profit margins * Payroll as a % of revenue * Overheads as a % of revenue * Revenue per team member * Owner’s pay compared to industry norms Without benchmarking, you’re operating in the dark.   BENCHMARKING: WHAT DOES GOOD LOOK LIKE? Let me give you a simple analogy. My son runs the 100 metres in around 11.4 seconds. Is that good? It depends who he’s racing. If he’s compared against runners doing 14 seconds, he looks exceptional. If he’s competing nationally, the benchmark changes. In business, it’s exactly the same. If your peers are running 20% net margins and you’re running at 5%, that’s not a cashflow issue. That’s a profitability issue. And until you understand what’s realistically achievable in your industry, you’ll normalise underperformance.   THE 5 MOST COMMON CAUSES OF PROFITABILITY PROBLEMS In my experience, profitability issues normally come from one (or more) of these areas: 1. PRICING IS TOO LOW This is the big one. A 10% discount doesn’t reduce profit by 10%. It can reduce profit by 30–50%, depending on your margin. Many business owners underprice because they: * Fear losing work * Compete on price * Haven’t reviewed pricing in years But inflation, wages, and supplier costs move — your pricing must too.   2. DISCOUNTING HAS BECOME HABITUAL Occasional strategic discounting is fine. Permanent discounting destroys margin. If your team discounts without understanding margin impact, you’re quietly eroding profitability.   3. PAYROLL STRUCTURE IS TOO HEAVY Payroll is usually the largest cost in most service businesses. Ask yourself: * Is every team member operating at the right level? * Are senior people doing junior work? * Do you have clear productivity targets? * Is revenue per employee healthy? A bloated or misaligned structure creates constant financial pressure.   4. INEFFICIENT PROCESSES The business owner I mentioned is bringing in a lean consultant. Why? Because inefficient workflow costs money. Toyota built its reputation on Kaizen — continuous improvement. Small inefficiencies repeated daily become large financial drains over 12 months.   5. LACK OF FINANCIAL VISIBILITY Most business owners look at their bank balance and make emotional decisions. But your bank balance does not equal profit. Without: * Clear allocation systems * Regular KPI tracking * Margin analysis * A structured Profit First system You are reacting instead of leading.   WHERE PROFIT FIRST COMES IN Profit First works because it uses behaviour, not willpower. Parkinson’s Law says:   The more of something we have, the more we consume. If you see £80,000 in your bank account, you feel comfortable. If you see £12,000 available for expenses because profit, tax and owner’s pay have already been allocated — you become more resourceful. Profit First forces discipline automatically. It creates artificial scarcity in the right way. It strengthens the engine before the car breaks down.   TIMING PROBLEMS VS PROFIT PROBLEMS Now, to be fair, sometimes cashflow genuinely is about timing. For example: * Large corporate clients paying in 60–90 days * Project-based businesses with uneven billing cycles * Seasonal businesses But if you are: * Getting paid regularly * Not operating on long credit terms * Not highly seasonal Then persistent cashflow stress usually points back to profit.   PRACTICAL STEPS YOU CAN TAKE THIS WEEK If any of this resonates, here are 5 things to do immediately: 1. Calculate your true net profit margin for the last 12 months. 2. Review your pricing — when was the last increase? 3. Check payroll as a percentage of revenue. 4. Identify any “automatic” discounts being given. 6. Separate profit from your main account if you haven’t already. Even small margin improvements create massive breathing space over time.   FINAL THOUGHT If your car keeps breaking down, you don’t just reset the warning light. You lift the bonnet. Cashflow pressure is stressful. I get that. But if you fix the profit engine, the cashflow warning light often disappears on its own. If you’d like help reviewing your numbers properly, you can reach me directly:  stephen@cheltenhamtaxaccountants.co.uk [stephen@cheltenhamtaxaccountants.co.uk] Let’s make sure your business is not just growing — but profitable, stable, and giving you the freedom you actually want. Have a great week. Stephen Edwards Profit First Accountant and Business Coach Gro Profit First Accountants

Growing Too Fast? Here’s What Most Business Owners Miss

Welcome to This Week’s Profit First Accountant Newsletter! Estimated Read Time: 4 Minutes Hi Everyone, It’s Stephen Edwards from Gro Profit First Accountants, and welcome to this week’s Profit First Accountant Newsletter. This week, I want to bring it back to real-world Profit First stories — straight from the fire. I’ve recently been working with a business that had grown to nearly £1 million in revenue. They built a team of over a dozen people. On the surface, everything looked like success. For the first few years, it was happy days. But then came the squeeze. This is classic over-trading. Revenue grows, the team expands, overheads increase, and the pressure to constantly win new business becomes intense. Margins get tighter. Cash gets tighter. Decision-making becomes reactive rather than strategic. The numbers ran away from them. And this is the key point: Growth without financial control is not sustainable growth. I always talk about building a profitable and sustainable business — not just a growing one. WHY PREVENTION IS BETTER THAN CURE One of the biggest misconceptions about Profit First is that it’s something you implement when you’re struggling. It isn’t. In fact, the best time to implement Profit First is when things are going well. Why? Because that’s when you can build the habits and systems before pressure hits. Think about it like health. The NHS largely deals with problems once they exist. But prevention — good habits, discipline, structure — is what keeps you out of trouble in the first place. If your business is in a good place right now, don’t take it for granted. That’s the time to: * Understand your margins properly * Track trends monthly (not just yearly) * Build cash reserves * Put clear controls and KPIs in place * Have regular financial conversations that challenge assumptions Because for many businesses, two bad months can be enough to cause serious damage. THE POWER OF CASH RESERVES One of the biggest benefits of Profit First isn’t just paying yourself more. It’s building certainty. When you have: * Money set aside for tax * Money set aside for VAT * Money set aside for overheads * A profit pot * A small “rainy day” reserve You operate differently. You think strategically. You don’t hire from panic. You don’t cut staff from fear. You don’t make decisions from scarcity. Without reserves, every decision feels stressful. With reserves, you make calm, deliberate choices. That’s the difference between reacting and leading. WHEN IT GOES WRONG… In this particular case, because the structure wasn’t in place early enough: * Team members had to be let go * Culture was affected * Debt had to be taken on * Large tax bills created personal financial pressure We’ve also recently spoken to someone who received a very large surprise tax bill because there had been no proactive tax planning from their previous accountant. They now have to finance that personally and make lifestyle changes to deal with it. That’s not a position any business owner wants to be in. But it’s avoidable. THE ROLE OF HONEST CONVERSATIONS One of the most powerful elements of implementing Profit First properly isn’t just the bank accounts. It’s the accountability. When we work with clients one-to-one, we typically meet quarterly. Larger businesses may meet monthly for CFO-style support. Those regular conversations force you to step back and ask: * Is the trend healthy? * Are margins tightening? * Is payroll creeping too high? * Are we becoming too reliant on new clients? If a business trends in the wrong direction for too many months, something must change. But you can only spot that early if you’re reviewing consistently. HOW TO GET STARTED If you’re brand new to Profit First, start small. Set aside 1% of revenue into a separate profit account. Build the habit. But if you want to implement it properly — with the correct percentages for your industry and stage of business — it’s important to get the structure right from the beginning. Starting with unrealistic percentages can cause unnecessary pressure and make the system feel unsustainable. Profit First should be: * Realistic * Challenging * Sustainable * Aligned to your business model FINAL THOUGHT If your revenue is growing, don’t assume everything is fine. That’s often the most dangerous stage. The goal isn’t just growth. The goal is a profitable, sustainable business that works for you — not one that traps you in stress, debt, and constant firefighting. If you’d like help implementing Profit First properly, feel free to reach out. stephen@cheltenhamtaxaccountants.co.uk [stephen@cheltenhamtaxaccountants.co.uk] Until next week, keep putting Profit First. Stephen Edwards Profit First Accountant and Business Coach Gro Profit First Accountants