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This portion of this app is the result of a lifetime of experience having founded and owned or co-owned 7 businesses, and in all but one case, me being the one primarily responsible for the companies finances.
Although this feels a lot like it’s mostly a Profit First implementation, it is a mashup of things drawn from God’s Word, Larry Burkett, Dave Ramsey, Eli Goldratt and of course, Mike Michalowicz. Mike Michalowicz provided the primary missing piece of the puzzle with his Allocation Percentages based on an extensive multi-year, multi-company study, but also solidified Eli Goldratt’s ‘Throughput’, or what Michalowicz refers to as ‘Real Revenue’, where we put all company types on an equal footing by subtracting out the money that was never ours in the first place and putting it in some type of Escrow account (formal or informal). Here we use the Materials-Payroll envelope as our virtual Escrow account, and fund it with Deposits using the Deposit Allocation Percentage of 100%. The primary objective of this app is to provide small business owners visibility into the flight path of their money, with the ultimate question answered, ‘How much of that pile of money, irrespective of size, is MINE?’
If Dave Ramsey would die on the sword of NO CREDIT CARDS, Mike Michalowicz would sacrifice himself on the sword of MULTIPLE BANK ACCOUNTS, but this can be used with or without the physical bank accounts (the envelopes represent virtual bank accounts, and are sufficient for all but the least disciplined among us). If you happen to be one of those who simply lack the discipline to spend within your means, feel free to have physical bank accounts for each envelope and implement the multiple bank strategy Michalowicz recommends, and then simply do all the bank transfers required to make this work for you.
To begin using this app, you will first want to do the Profit First Assessment (for GoodProfitGroup Members, this is on your Profile Page of the GoodProfitGroup app or you can find it on the Profit First page of the GoodProfitGroup Topics). Initially you need to run the Assessment using the appropriate Throughput (Real Revenue) range, this will reveal both your Current and Target allocation percentages according to Profit First, then analyze your results and add another row to the Profit First Account Percentages and name it TAP. The TAP or Target Account Percentages that the Profit First system suggests may not be what you want to do, so make your own using your own percentages (just make sure they add up to 100%).
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