FB LIve with Kate Toon

In our latest Facebook Live conversation, we were joined by Kate Toon, writing entrepreneur, as well as a popular coach, speaker, author and podcaster. In our discussion, Kate shared her experience of using the Profit First methodology and what it has meant for her business and life!

Thank you to everybody who joined us live for this event and thank you so much to Kate for being with us.

Watch the video

“It’s very emotional having your own business. It feels like a reflection of who you are, how much money seems to be the measure of who you are as a human. It’s not, but it can feel like that. And so I think what Profit First does, is it makes everything super rational. You can’t deny the figures and the figures then help you make informed decisions about everything. For me, it’s helped me make decisions about what I’m going to invest in, in my business. ” – Kate Toon

 

Well, thank you so much for being here. I am really excited to have this conversation. We were meant to have this the end of last year, but all good things, sometimes it’s worth waiting for. So Kate, you actually don’t need an introduction because so many people know who you are, but for those that do not, can you please tell us a little bit about who you are, what you do, and how long you’ve been in business for?

So I’ve been in business for about 12 years and I started off as a freelance human for hire doing all manner of different things, niching down into copywriting, and then SEO copywriting. About five, six years ago, I started doing some passive income products, selling a few templates, a few courses, and now those have evolved into three businesses. So I don’t have any clients anymore. My businesses are all now education based. I teach copywriters how to be better copywriters. I teach people how to grapple Google and get more traffic and conversions. And then my third business is teaching people how to use digital marketing to build a successful business.

I want to delve into today, your experience with Profit First. So, when you first came to know what is Profit First, what was that?

I remember it very clearly, actually. It was at a conference called Art for Business Conference and there was this wonderful lady presenting, I can’t remember her name. She’s got a really weird second name, but anyway, it was you. And it was a small group. There’s about eight of us, and there was another lady there who was some kind of coach. I can’t remember to be honest. And you were explaining the bucket system. And she actually turned her screen to me with her computer on, showing all her bank accounts. It was very open of her. And I saw that all these bank accounts had so much money in them and that really shocked me, that someone would just have that money sitting there for starters. And it just really made me think, “Wow.” It really made me stop in my tracks. And I feel almost like an ignoramus, because it seems so obvious now, but at the time it was like a flash of light.

Can I ask you, what have you managed to do personally by implementing Profit First?

So, totally take away the stress of tax and GST time. And that sounds like nothing, but that was very stressful to me, very stressful. I pay myself a salary, which has enabled me to live the life that I want to live. I’ve also paid off my mortgage and been able to buy an investment property, which is very exciting.

 

Laura Elkaslassy:

All righty. This is always that awkward first couple of seconds where you’re like, “Are you live? Are you alive?”?

Kate Toon:

Yeah, you are. I always sit here like this going, and then it plays back and I’ve been live the whole time. So, yeah.

Laura Elkaslassy:

That is it. All right. So we’re going to get started because we’re a minute late and that’s on me, not Kate.

Kate Toon:

A whole minute. A whole minute, my God.

Laura Elkaslassy:

Well, thank you so much for being here. I am really excited to have this conversation. We were meant to have this the end of last year, but all good things, sometimes it’s worth waiting for. So Kate, you actually don’t need an introduction because so many people know who you are, but for those that do not, can you please tell us a little bit about who you are, what you do, and how long you’ve been in business for?

Kate Toon:

So I’ve been in business for about 12 years and I started off as a freelance human for hire doing all manner of different things, niching down into copywriting, and then SEO copywriting. About five, six years ago, I started doing some passive income products, selling a few templates, a few courses, and now those have evolved into three businesses. So I don’t have any clients anymore. My businesses are all now education based. I teach copywriters how to be better copywriters. I teach people how to grapple Google and get more traffic and conversions. And then my third business is teaching people how to use digital marketing to build a successful business.

Laura Elkaslassy:

Love it. And I love what you do. I love your nibbles and we’ve had you on to…

Kate Toon:

My nibbles? Yeah, cool.

Laura Elkaslassy:

Nibbles.

Kate Toon:

Nibbles. Yes, yes.

Laura Elkaslassy:

You’ve got to be so careful with that. Thanks, Kate for coming up with that title.

Kate Toon:

It was deliberate. I’m not stupid.

Laura Elkaslassy:

And we’ve had you share your SEO knowledge within our group of Profit First Professionals. So there’s so much that we’ve learned from you, so thank you. I want to delve into today, your experience with Profit First. So, when you first came to know what is Profit First, what was that?

Kate Toon:

I remember it very clearly, actually. It was at a conference called Art for Business Conference and there was this wonderful lady presenting, I can’t remember her name. She’s got a really weird second name, but anyway, it was you. And it was a small group. There’s about eight of us, and there was another lady there who was some kind of coach. I can’t remember to be honest. And you were explaining the bucket system. And she actually turned her screen to me with her computer on, showing all her bank accounts. It was very open of her. And I saw that all these bank accounts had so much money in them and that really shocked me, that someone would just have that money sitting there for starters.

Kate Toon:

And it just really made me think, “Wow.” It really made me stop in my tracks. And I feel almost like an ignoramus, because it seems so obvious now, but at the time it was like a flash of light. I’m too lazy to read Mike [inaudible 00:03:08] book, so instead I got you to help me set it up in the first place, just with the different accounts and the different percentages. And then I just struggled with it for a while. I mean, I got a whole story here. How much do you want me to say? I can.

Laura Elkaslassy:

Oh no, I love this. Because that’s the biggest thing that people ask me all the time, and it’s really nice that I’m not answering these questions, because I say the same thing over and over again. What were the challenges? Did you implement it all? What were the things that you learned from it that were surprising? So, yeah, go for it Kate.

Kate Toon:

Okay, I’ll keep going. This is one of my favorite topics. I’m a complete convert. I have drunk the Profit First Kool-Aid and I drink it every day. So yeah, you gave me my percentages and I was just like, “I have to set up all these bank accounts, that’s too hard.”

Laura Elkaslassy:

You were so against it.

Kate Toon:

I know. So I set those up and then I had to get them putting through into Xero, and that felt hard. In reality, it wasn’t. It was just a bit fiddly and I think anything to do with money back then, and I was like, “Don’t make me do money things.” So got those set up and you gave me my percentages. I can’t even remember what they were back then. I’m going to actually find out what they are now though, because I think that will be interesting. I’ve got a little spreadsheet that I’ve got here. So you gave me my percentages, I think back in the day I was still a solo contractor. So I was doing kind of 50% owners pay, 25% expenses, whatever, yada yada, yada, and then 1% or 2% profit or something like that. And for the first three months it was just getting into the motion of it, because obviously I didn’t have huge amounts of money coming in.

Kate Toon:

So I’d kind of put some money away for this, that, and the other, then I’d have to immediately take it out again because my cashflow wasn’t good enough. But it did kind of stop me in my tracks and stopped me spending because I wanted to build up the money and to the pots. So, that was really good. I’d say it took me about three months to get into the habit of doing it. And I began doing my little dispersal every Monday morning and that was an enjoyable thing to do. And my goal with that to begin with, the big challenge that I wanted to overcome with Profit First was having enough money for my BAS each quarter, because it always came as a surprise. It didn’t matter how much I put aside, I never had enough and I was always borrowing from the future.

Kate Toon:

And I was like, “What is going on? Where is my money going?” And then the next big goal after that was to be able to pay myself a salary, which I hadn’t done yet. So just like everyone else, all the money went into one part. I kind of put money aside for this and that, but I just spent until it ran out then panicked, earned some more, spend that. And it was just a horrible, hideous rollercoaster. So yeah, that was the first kind of three months of Profit First.

Laura Elkaslassy:

Did you stick to it? Tell us the truth.

Kate Toon:

Oh, shut up. You know I didn’t. So every now and again, I think it’s every six months we agree. I think we started with three months, then we were at six months. Come in and you’d be like, “You’re not doing it properly. You keep borrowing.” And I was like, “Yeah, whatever.” So it probably took… I’m going to be honest, and I don’t want this to discourage people because it’s just a mindset shift, but it probably took me a full year to just become really strict with it and not move it. And the reason it took so long is because I had to build up the money. I had to build up enough money in my salary saved up account to pay myself a salary into my personal account. I had to have enough money in my expenses to cover the big, sometimes annual fees that came with subscription.

Kate Toon:

So it takes a while for it to flow. There is a bit of borrowing and back and forth. And then this all seemed to coincide, whether it was the gods of Profit First or not, with my business suddenly taking a massive leap forward. So I had a 220% increase in revenue within the space of a year.

Laura Elkaslassy:

That’s massive.

Kate Toon:

So suddenly, there was all this money to move around and put everything. So we readjusted the figures again and again. Simple things, I could always put aside 10% for GST and then obviously, because I was spending so much on other things, it actually came down to 2% on GST because it was… You know what I mean?

Laura Elkaslassy:

Yeah.

Kate Toon:

So there was degrees of fiddling and changing, and then I incorporated into a company and that changed the figures again. And I’ve been using the same figures now as I have been for about a year, because I set the revenue target for this year to be the same as last year. I’m not about scaling anymore, I’m actually about scaling back. So trying to earn a similar amount of money, but just not work so damn hard.

Laura Elkaslassy:

That’s awesome.

Kate Toon:

Yeah. So that’s a big, long blurble. Was that useful? I don’t know if there’s anything you want to pick out of that, but-

Laura Elkaslassy:

Yes. There’s lots that I want to go, “Hey, Kate.” Let’s start with the fact that you said that it was challenging because of the revenue. This is so, so common for business owners. They’re like, “Well, Profit First isn’t going to work because I don’t have the revenue coming in,” or “I have lump sums coming in and then there’s no money,” and it’s feast and famine and that sort of thing. I think one of the things that I noticed when you were implementing Profit First is that you were really clear as to what needed to come in. Not just, “I need more money now.” Which is what the cycle was that you were in before you implemented Profit First. Do you want to talk a little bit about that?

Kate Toon:

Yeah. Because the big thing for me was, I think more than anybody else in your group, my money was either all or nothing in a way that no one else will understand, because I launch a course three times a year that makes $150,000 a launch, and then there was nothing in between. Do you know what I mean? Really not. Just trickles and dribbles of nothing. So you get all that money and you’re like, huh. And it’s the determination to go, “No, this has to see me…” It’s like being a squirrel. “These nuts have to see me through the next three months.” You know what I mean? Because otherwise in a month from now when I’ve spent it all, I’m going to have to keep working so hard. So, that wasn’t the goal in the beginning. I think it was just to get through BAS and pay myself a salary.

Kate Toon:

Then it became, “How do I spread this money over the periods in between the launches?” And then after that with the freedom of doing that, I saw that it would be really beneficial for me to have recurring monthly income. So, not rely on these big figures. So that’s when I set up more memberships and I started to really build out those more, so that it wasn’t such a peak and a trough. There was money coming in every month. And then now at the stage I’m at now, it’s actually become a reverse scaling thing, because the other thing that people say is, “Profit First isn’t for businesses that are growing.” So just don’t understand. It’s going to restrict your growth.

Laura Elkaslassy:

Say what?

Kate Toon:

I don’t know. What are you talking about? How in any way can knowing how much money is yours, be bad for growing? I just think that’s absolute nonsense. I hate it when people say that. But what it’s become for me, is it allows me to take my foot off the pedal. Because right now because I’ve had some launches, I can see that I have enough money to pay myself until the end of the year. I have enough money to pay my team through until next year. I’ve got enough money for my BAS, enough money for my GST and I can say that I don’t need to work quite… So if that opportunity comes along for me to do something for free for exposure, I can say, “You know what? No, thank you.” And I think that’s what the profit account really does. I was good, I kept it building up for three months until I had that kind of my business could survive if everything went wrong money.

Kate Toon:

And then I started to take that money out and use it to pay off debt. So I paid off my credit card debt, paid off my mortgage, then I started to use that money to think about my future and where I could invest it. And none of that would have been possible without Profit First. But when you’re starting out, the profit account becomes what I like to call the… I don’t know if I can swear in your groups, so I won’t.

Laura Elkaslassy:

Of course.

Kate Toon:

The F you money. When you get a client that is being obnoxious, you need to see that money in your Profit First account. You go, “You know what? I don’t need to put up with this. You need me more than I need you.” Or when someone asks you to do something at reduced rate, you look at the money and you go, “You know what, I’m alright. I don’t need to fight over this job like a seagull fighting over a chip.” I’m going to stick to my rates, which reflect my value. I’m not going to lower them because I’m desperate for money, because I can see over here is I’m not desperate. And I think that’s what really helps.

Laura Elkaslassy:

Absolutely. Do you remember when you first asked me the question as to what buffer amount you needed for that three to six months? And I think you decided to not talk to me for a period of time.

Kate Toon:

$50,000 or something. I think it was, wasn’t it? And the thing is, two years prior to that, I’d been $50,000 in debt to the tax office. So that just seemed impossible to me. But this is it, it’s about chipping away. And it just teaches you a bit of… I can understand to a degree why people say, “Oh, it hinders growth.” Because lot of people do grow things stupidly. They randomly buy things that they can’t afford. “Oh, I need this $10,000 mastermind because it’s going to help me up level. I can’t afford it, and I’m going to not have enough money to pay my GST and tax. And we’re going to have to eat baked beans for the next six months, but I need it to up level.” You don’t need it to up level. It makes you more judicious about the financial decisions that you make, because they’re actually based on fact rather than emotion.

Kate Toon:

And that’s so important for so many business owners. It’s very emotional having your own business. It feels like a reflection of who you are, how much money seems to be the measure of who you are as a human. It’s not, but it can feel like that. And so I think what Profit First does, is it makes everything super rational. You can’t deny the figures and the figures then help you make informed decisions about everything. For me, it’s helped me make decisions about what I’m going to invest in, in my business. It’s made me look at things like my subscriptions and what I’m paying for. It’s made me be able to make decisions about, “Can I afford to hire people that help me?” When I started with you, I had one VA. Now I have nine people working for me-

Laura Elkaslassy:

I remember that conversation.

Kate Toon:

Yeah. Because I know I can afford them. I never wanted to take someone on and then let them down, that’s a big thing to me. So yeah, I’ll stop talking.

Laura Elkaslassy:

In terms of the whole revenue and growth thing, because I hear that a lot as well, that it hinders growth. And all that does to me is highlight the mindset that people have, that’s about sales, revenue, revenue, revenue, and not profit. You’re not looking at the profit in your business. If you think that this is what is hindering your growth. You can have a massive business and no money.

Kate Toon:

Yeah. And I think it’s a fundamental misunderstanding of what Profit First is. That’s what it is. It just to me shows that they don’t really understand what we’re talking about and that’s it. I think most business owners, if you sat them down and said, “Okay, you made this much money last year. What percentage of it was yours to take home?” Will have no idea.

Laura Elkaslassy:

No. Not at all.

Kate Toon:

What salary you’re paying yourself. They would say, “I don’t pay myself a salary.” Surely that’s the goal, to be able to… But some people are like, “Oh, I don’t want a salary. That’s too constricting.” And I’m like, “For me, a salary is freedom.” Because I know everything’s safe, everything’s covered, my mortgage is covered. Everything’s covered. And that means I can take risks.

Kate Toon:

And that’s what being an entrepreneur is about. It’s about being passionate, and it’s about being a risk taker, but they need to be calculated risks. You’re not just doing random things for the sake of it. They need to be risks based on rationale, and I think that’s what Profit First allows you to do. So yeah, I think people who say that it hinders growth just fundamentally don’t understand what it is. It’s like people who say that routine ruins creativity. Routine, doesn’t ruin creativity. If you plan in your week to have a day a week where you can do creative stuff, knowing that all your admin and boring stuff is done, then you can be more creative on that day. So routine actually breeds creativity.

Laura Elkaslassy:

Absolutely.

Kate Toon:

Yeah.

Laura Elkaslassy:

Yeah. No, I agree with that completely. And so I guess the next question that I have for you is, did the percentages work?

Kate Toon:

Yeah, they did. I mean, they actually worked in my favor because I think I was… You knew my mindset when we did it, and so I think you bumped them up a little bit. So you gave me less and you gave my GST and whatever a little bit more. So this is a big thing for me. So this is the next big thing to talk about. What happened was I ended up having a surplus every year. There was too much, I’d saved too much for my GST, too much for my tax. So instead of getting this kind of personal tax back thing at the end of the year, instead I would get to the end of year, I pay all my GST and tax and I’d have money left over. And again, that changes the way that you run your business. For the first time ever, I was able to plan for my tax and also do things like make super contributions that I hadn’t made before. [crosstalk 00:16:39].

Laura Elkaslassy:

That was a big thing for you.

Kate Toon:

Yeah, I’d never paid super, and I had no super. Now I pay the maximum that I can pay every year. And I look at the end of the year, because I’ve got all the money sitting there, I can say, well, it’s actually going to be more beneficial for me to use some of that money I’ve saved for my tax to pay off my super and I can do that now, I can do tax planning. Wow. It’s so sexy. So enjoyable. But equally as time goes on that money in the business grows. It’s just sitting there, it’s not needed for anything. And I think I had a real flip. It was only about a year and a half ago, I realized that money is mine, it’s mine. And I can do what I want to do with it. I can take it as a dividend. I can invest it here. I can do that with it, but it’s my money. And that’s all built up because I’d been overly cautious. I don’t pay myself a huge salary.

Kate Toon:

I’m not a particularly extravagant person because I’m in this for the longterm. And I do want to think about my future, but again going from massive debt to now having a surplus, it’s life changing. And it’s not because I make… This is a really important thing to say. I mean, I do make a lot more money now than I did when I started, but it’s actually the reason why I have a surplus. It’s because I understand what money is mine, I’m cautious, I don’t overspend. I think about things properly. I look for ways to reduce my expenses and therefore, even if I was earning a 10th of what I’m earning now, I think I would still have a surplus just because it’s the mentality, not the money. Do you know what I mean?

Laura Elkaslassy:

It’s so true. And the amount of people that come back to me and say, “I don’t know where all this money’s come from. There’s more and more of it. It’s accumulating.” And it’s not as if they’ve had… You had exponential growth from one year to another, but then it’s been consistent since then. And most people don’t have that kind of growth yet to have that exact same feeling and experience. And I guess one of the things that I wanted to sort of highlight is that it doesn’t actually… You don’t go without. A lot of people think that by implementing Profit First and looking at your expenses and looking for creative ways of reducing them, that it means going without, that there’s this lack that comes with it. Can you talk to that?

Kate Toon:

Yeah. I mean, I think I just went from recklessness and spending what I have to being a bit more organized about it. Sure, there was a period of transition where I was trying to get this right. But it wasn’t like I was eating dry bread and gruel. I wanted to be able to build up that salary account so it has a little bit in it. And when I started paying my salary it was quite minimal and I’ve increased it, increased it, but I’ve not increased it that much. So, sure there’s a period of transition between and then being organized. Do you know what I mean? So if you have been a big spender and you’ve got credit card debt and you’ve [inaudible 00:19:34] there’s going to be a period of transition. But again, it’s such a lovely mindset shift because you start to take pleasure in saving, not in spending.

Kate Toon:

Just the joy. I’ve got all the apps on my phone, got my Xero account and the joy, some mornings I’ll just wake up, I’ll just look at my profit account and it just makes me feel happy. It makes me feel happy, because I could not see the fruits of my labor, I just didn’t know where the money went. And I’m working so hard and I’m like, “I don’t feel like I’m getting anywhere.” And I don’t know what it was. I mean, it is weird what you say, because it does feel like the money is coming from somewhere. There’s some kind of leak and the money’s just seeping in and I don’t know where it’s coming from, but it’s just tiny. It’s like that book Atomic Habits, it’s tiny changes. Tiny changes add up and you don’t notice it for a while, then all of a sudden you look and you’re like, “Wow, look how much is in my corporate account.”

Kate Toon:

I remember the first time I looked, it wasn’t even that much, it was $2,000 or something, but I’ve never had $2,000 that was mine. Wasn’t for the groceries. It wasn’t for my business. It wasn’t for my mortgage. It was actually mine. And then I didn’t want to spend it. I wanted to [crosstalk 00:20:48].

Laura Elkaslassy:

I Remember that. You were just like, “Can I just have it there?” No, Kate. No.

Kate Toon:

Now things have evolved a lot. And obviously since we worked together, which was a while ago now, I fiddled with my figures a bit more and… Do you want to know what my percentages are now?

Laura Elkaslassy:

I do.

Kate Toon:

You might tell me their wrong and then I’ll get in trouble. So because I’m now a company, my incomes come in and I kind of have what I call my hard costs or my cost of sales. It’s not really cost of sales, but I always take my money out for my key team member, which is Leanne and her team. So, that goes out first. And that’s the-

Laura Elkaslassy:

So, your materials and subs?

Kate Toon:

Yeah. So not quite. I’m a bit different. So money goes out first, 17% for her, which is way too high. I’ve got way too much money in my account sitting. I could pay Leanne for another year and she’d be cool. I always take out my GST. My GST is now down to about 6% because of [inaudible 00:21:43] and whatever. Then after I’ve done that, then I implement Profit First, if you see what I mean. So my profit proffer is now 15%, my expenses, 27, my salary, 28, my tax 10 and my company tax 20. So those bottom figures add up to 100, if you just take off the top. And that’s working. Usually, I get to the end of the quarter ready to pay my bass and there’s enough money in there for my BAS. Usually the expenses is usually bottomed out, I do spend that. And that always freakes me out. I’m like, “Oh, it’s all gone.” And I’m like, “It’s supposed to be all gone. That’s the point.”

Kate Toon:

The Leanne budget and the salary, there’s always lots leftover. So at the end of each year, I know what everything’s going to be. I move the money into a separate account, do my tax return, and then once I’ve done my tax return, I know that money is mine and that goes now into a different account. I’ve actually set up a family trust. That money goes into that. So it’s just so grown up now, Laura.

Laura Elkaslassy:

That’s really interesting because exactly what you’ve done is correct. Those things like GST have to come off top. It’s not your money. If you don’t have Leanne, it’s very difficult to run your business and that sort of thing. So, that’s completely correct. And the thing that I want to highlight here as well is that you have to make the bank accounts purposeful for your business. And so the fact that you have that 10% tax and that 20% company tax is really important. You know what that is. Someone else may only want one because that’s meaningful enough to them.

Kate Toon:

Yeah. I like to have it quite split out. To be honest, these days I kind of put that tax money into the family trust and then bring it back out again for various reasons. But it’s a discipline. Now I feel so much more confident about what it is. I feel like I wouldn’t need the numbers as much, but I’m not letting go of the numbers because before you know it, it just takes a little bit… It talks about atomic habits positively. Just takes a little bit of a flip the wrong way, and then something comes around and you don’t have the money. So it just really made me take a step up in terms of my financial literacy and also my financial responsibility, because the thing I’m very good… I’m quite good at making money. I’m quite good at that.

Kate Toon:

But knowing what to do with the money once it comes in is a different skill set, and it’s not my skillset. I can make something, paint it blue, whack it on my website and sell it. When the money comes in, making sure that everything is copacetic. Don’t want to get in debt again, want to make sure I can always pay people. That’s a different skillset, which I didn’t have. And so I needed to get external advice and there’s no shame in that. A lot of us aren’t brought up with good money management skills. All we’re bought up with, weird beliefs around money that our parents gave us and that can be really challenging.

Laura Elkaslassy:

Absolutely. Can I ask you, what have you managed to do personally by implementing Profit First?

Kate Toon:

So, totally take away the stress of tax and GST time. And that sounds like nothing, but that was very stressful to me, very stressful. I pay myself a salary, which has enabled me to live the life that I want to live. I’ve also paid off my mortgage and been able to buy an investment property, which is very exciting.

Laura Elkaslassy:

So exciting.

Kate Toon:

Obviously, the bank owns it at the moment, but I’m confident that I can pay that out. I’ve managed to employ a team of nine and keep them employed through COVID. When everyone else was sacking people and retiring, I managed to keep my team throughout the whole of COVID. And I’ve managed to turn up for my customers and my members all the way through COVID as well, even though it was challenging for me because obviously everyone was very anxious about money and I was, and I did go into overdrive a little bit and do more. Actually for me, I don’t want to make anyone else feel bad, but COVID was probably my most financially successful year, partially because I pushed myself quite hard.

Kate Toon:

But also because I was already set up for that success and when COVID hit, I was able to look at my accounts and go, “I’ll be all right for quite a while.” Because I have saved this money all this time. So yeah, I don’t know if I really even understand the impact of what it’s done for me yet, because I’m still in the trenches doing the work. And always am somebody that if I admit that the struggle is over, then I’ll totally lose my carrot. I need the carrot, I need the stick, but talk to me in five years time when I’m able to maybe… I don’t think I will, but I want to be able to get to the point where I could walk away from my business and know that I’m set. Know that I don’t want to, but know that I could. That’s the goal for me.

Laura Elkaslassy:

It’s finding the motivation and I think where you’re at and what people don’t understand with Profit First, is they generally come to Profit First because they’re in survival mode where it’s just like, “Oh my gosh, I don’t know whether this business is even viable. I can’t pay myself. I don’t even know if I can hire anyone to help me because I can’t make any more money until I do.” And that sort of thing. And then from there, you get into the thriving stage of Profit First, and it’s just as important. And so the fact that I’ve seen you go from sole trader being absolutely petrified of paying your BAS and that sort of thing, and even being sure that you could take the money that you wanted to pay yourself as well to now having the team that you have, which was something that you swore black and blue that you’d never do.

Kate Toon:

Yeah. I mean, they’re all subcontractors. I did try and employ someone, that wasn’t my cup of tea. One of the joys of Profit First is you can dial it up and down depending on how things are going. If your income drops, you just change the percentages, take a little bit less profit and that’s going to be fine for a while. That’s fine, you can change it based on what’s coming into the business. And again, with my employees, I’ve structured it in such a way that I can dial it up and dial it down. They’re subcontractors and I’m often their main client, but there’s that freedom to say, “Hey, next month, things are going to be a bit quieter, can I have a couple of less hours?” And that works well for me, that gives me that flexibility and that freedom. So I think the other thing that people misunderstand Profit First is they think it’s super rigid. “Oh my God, I’ve got to do this.” It’s not, it’s actually quite flexible. It’s that same thing, routine, creativity you can adapt it.

Laura Elkaslassy:

You should adapt it.

Kate Toon:

You should adapt it, because it should change as your business changes and as your personal goals change. Maybe you want to dial down the profit for a bit because you do want to make an expense in your business. You want to buy something in your business. You want to invest in something, you want to get a brand new website and you’re happy to maybe pay 10 grand for that. And maybe that month take a bit less profit or whatever it may be. Do you know what I mean?

Laura Elkaslassy:

Yeah. [crosstalk 00:29:00] You’re able to do that because you’re still taking profit. So the biggest mistake I see people do is go “Well, I’ll just keep changing the percentages to make it work for me every week.” Because, they don’t have enough money to actually stick to what the money is telling them. And so once you’re in that thriving stage, or once you have that baseline profit and the things are being met that are causing you stress, you can adapt. This is not permission from Kate, to change your percentages all the time.

Kate Toon:

No, no, no. I mean, in the first year, I think we fiddled with them three times and then I stuck with the same percentages for a good year, two years. And then when I became a company, they obviously changed and now I’ve stuck with them again. And I know that they are cautious figures. I know I could take more salary, I could take more profit. I just don’t want to at the moment. I’d rather see that money building up within my business. I’m not going to take that as dividends yet, because what I’m hoping to get to is the point where there’s enough money there that I could actually just take dividends each year and that’s my salary. I’m an old badger and I don’t want to leave the house anymore and I just want to stay in with all my cats. I don’t even like cats, but I’m going to get some.

Kate Toon:

But yeah. No, it’s incredibly freeing. I mean, the advice I’d give, and this sounds like I’m spruiking you, is I couldn’t be bothered to read the book and I needed someone to keep me accountable as well. So for me having a Profit First coach as it were, to check in with each three months to say… I also wanted a pat on the bottom [inaudible 00:30:33]. I wanted someone to say, “Well done, you’ve done it right. Yeah, that’s right. Yeah. You’re going well. Okay. No, no, no, you need to tweak that one a little bit.” I needed that for at least the… I think we did about a year together when we started. And then I think it’s also really important to get an accountant and a bookkeeper who appreciate Profit First and don’t scoff at it because often again, the reason they scoff it, it’s just because they’re not used to it. And that’s just not how they operate, but there’s plenty of accountants out there who do know Profit First.

Laura Elkaslassy:

Absolutely.

Kate Toon:

They’re the ones you should be going for. Because you don’t want to be arguing with your accountant about how you want to organize your money. And that’s just a nightmare. If you want to do this, then they should come along for the ride. And if they don’t, find a new accountant.

Laura Elkaslassy:

I couldn’t agree more. You’re speaking my language, and we could talk about this forever. I want to acknowledge the time that you’re giving to talk about this, but I do have one last question for you. So what would your advice be for any other business owners that are watching and maybe considering implementing Profit First, what advice would you give them?

Kate Toon:

I would say for me, because I’m lazy and I don’t have time and I’m interested in it, but I’m not really interested in it. I just want the end result. I’m not interested in the… I would get someone to sit down with you, have an hour long chat. That’s going to be an illuminating, save you reading the whole goddamn book, set up your little spreadsheet and then just be a bit patient. Give yourself three months to get your head around it. But I am in no way affiliate for Profit First, I make no money for… I should, Jesus. They literally should pay me to do this. I am not. But when you find something that has changed your life in the way that Profit First has changed mine. I mean, I can almost cry. The difference that it has made in my life in terms of going from massive debt to feeling confident about my future. It’s transformational.

Kate Toon:

And I know I sound like a loon, but if there’s one thing you do, this is one of the key things I teach all my members, every student, one of the first things I say, I say, get a good accounting package and get your Xero locked in and do your Profit First. And your first hire should be an accountant. I don’t care whatever else you want to do. Xero, Profit First, accountant are my three things that I always say. Not affiliated with them, but that’s just what you need to do. So give it time, do it. You will not regret it. I promise you.

Laura Elkaslassy:

Thank you so much.

Kate Toon:

And if someone as daft as me, if someone who is as financially illiterate as me can do this, then anybody can. Because now I’m like a money beast. I’m planning my stocks and my shares, and I’ve got my trust and I’m on it. If someone asks me what my net profit is, I can go [inaudible 00:33:16]. I’ve got my figures at my fingertips and all started from that one lady turning a computer screen to me and me thinking, “How is that even possible that you could have those accounts and they’ve all got money in them? I don’t understand it.” And she wasn’t a fabulously amazing genius entrepreneur. She was just a regular business human. And it made me believe that it was possible.

Laura Elkaslassy:

And it totally is. And I think the patience is where you need to be, because there’s a lot of mindset that you need to grapple when you’re implementing Profit First. But if you stick with it and you have the right support and accountability, it can’t do anything but work.

Kate Toon:

I works. It’s just whether you go along with the flow and that’s why I really do think it’s a good idea to have someone to keep you accountable, because I reckon if you hadn’t checked in with me every three months, I might have strayed from the path. And then after that much time of just… You just get into the habit of doing it. And it becomes a really enjoyable thing that I do on a Monday morning. I really enjoy doing all my little transfers. I find it really satisfying and I feel a lot of set up for the week. And that’s the first thing I do every week, and it’s just a really positive way to start your week.

Laura Elkaslassy:

Awesome. I love that. Thank you again for being here and sharing the process. I’m pretty sure we’ve got comments and stuff. So I’m going to go through and respond to any questions there. But yeah, if Kate can do it, anyone can do it.

Kate Toon:

Yeah, that’s it. For sure.

Laura Elkaslassy:

And I truly believe that. Profit First is such a game changer and I really appreciate you taking the time to actually let us delve into your business, not everyone’s willing to do that, so I really appreciate it.

Kate Toon:

No, no. I don’t know why, but I think it’s good to be transparent and be honest about both the negatives and the positives of money, especially as women as well. Female entrepreneurs. So yeah, I’m glad I could help. And if one or two people decided to take the plunge because of this, then I feel like I’ve done my good in the world today and go and have an ice cream and be greedy.

Laura Elkaslassy:

Awesome. I love it. Thank you so much, Kate.

Kate Toon:

Thank you so much, Laura. All right, see you later.

Laura Elkaslassy:

Bye.

PROFIT CON

Interested in helping your clients build sustainable and profitable businesses?

Become A Profit First Professional

Complete the form and we'll send you an info pack.

Thanks for your interest, check your inbox for details on becoming a Certified Profit First Professional.

PREPARE YOUR BUSINESS FOR PROFIT FIRST IN 5 SIMPLE STEPS

even if you’ve never read the book!


Register your details below and we'll send you our free preparation guide and worksheets.

profit first

Thanks for your interest, check your inbox for the free guide.

ProfitCon Australia - Nov 10

 Online Workshops for Business Professionals looking to move out of day-to-day and move into an Advisory Role.

One moment...