The best book i've read on business finance
Leaving education and starting consulting is hard, and can be very stressful financially.
I’ve read tons of books on managing money in my solopreneur business, and this book Profit First is the best one I’ve seen.
I always have enough to pay myself, pay taxes, and have profit!
Here are the keys to setting it up:
The idea is to pay yourself first. So instead of figuring your profit by Revenue - Expenses = Profit. You flip it on its head: Revenue - Profit = Expenses.
You set up target allocations for four different bank accounts:
Profit > Operating Expenses > Owner Pay > Taxes
All money comes into the Income account. Then, I disburse it to the following accounts in this manner:
Profit: 5% > Operating Expenses: 30% > Owner Pay: 45% > Taxes: 20%
You can see in the image below what it was like when I sold something for $189 and $1071.
These allocations change as time goes on and I learn better what my real expenses are.
If you’re an educator contemplating leaving the steady paycheck, check out this book and implement it today. It helps you prepare for the feast and famine.