Michael Walker: Alright, I'm excited to be here today with my good friend Bill Litzter. So Bill is a certified Profit First professional. He's a mastery level pumpkin plan strategist, fix this next advisor who works with the one and only Mike Michalowicz, who wrote a book called Profit First, that's all about how do you set up your business so that you can't help but, be profitable.

And, from personal experience, I can, I remember the journey of before Profit First, after Profit First, and how much of an impact that book made on my life. I was about 36,000 in debt. And running a very not profitable business, and I distinctly remember, one of the lessons in the book because he talks about paying off your credit cards and like you having a little ceremony where you cut up the credit cards and and you like, dance around and make it a moment.

I chose the song celebrate good times, celebrate good times. Come on. And I danced around and I cut up the credit cards and that really helped along that journey. And so I'm so excited to have bill on here today. Bill is our accountant at modern musician. And he's also like the number, he won the award for number one, profit first accountant of the year, or you maybe correct me if I'm wrong on the official title, but basically you were on stage, Mike Michalowicz honored you for having that role. 

Bill Litster: Profit first professional of the year. 

Michael Walker: Top of first professional year. So cool. So cool, in fact, that we, Bill is also he has a background in music. He's a music lover, and he's also not too shabby at making music himself. In fact, together, we're going to be performing on stage at Mike McCullough's conference. That's coming up here soon, in a couple of weeks, we're going to be performing a song with him. So Bill, this is one of the longest intros that I've done on the podcast, but I feel like I just want to give people some context just in terms of how big of an impact the profit first methodology has had on our business and how at the core it is and how beneficial it's been working with you and with Mike's methodology.

So thank you so much for what you do. And I can't wait to connect with you and be able to share some of the lessons and strategies for the artists who are here today, because I also know how Big of an impact it's going to make on their lives and their music careers. 

Bill Litster: I'm happy to be here. It's good to see you.

Michael Walker: Awesome. To kick things off. Maybe you could just share a quick introduction about Profit First and I'd be curious here, like your journey with Profit First, like how you discovered Profit First. And also for anyone here who, they hear the name Profit First and they're like, That sounds like a good thing.

It sounds like I would like to profit first with my music. Maybe you could share a little bit of an intro just in terms of the overview of what profit first is all about and how it works. 

Bill Litster: Okay. So I'll tell you a story how I found it and that'll bleed into this, right? I've been in accounting, business, consulting, management, consulting.

Most of my career run companies. I own companies. But several years ago I got involved in a franchise business that I owned and basically it's going along there trying to build this company. My partner calls and he says, Hey, I'm not comfortable with you taking any money out of the business until we're profitable and making money.

All right. I had eight kids. 

Michael Walker: Eight kids, Bill?

Bill Litster: I have eight kids. I can't not just not have an income. And so for a year that, that year I made 11, 000 and it was horrible. I can tell you one, one day I went to my son, my 17 year old son who worked at Subway and I'm like, I don't have money to buy milk. Can I borrow money from you?

And that was. That just threw me over the top. I said I I said that's never going to happen to me again. I spent more time thinking about how to get out of that business than how to make it successful, right? So I finally got out of that and went back to consulting. And my big thing was consulting was I'm never going to let people be poor.

I'm going to help them never let that happen to them. And I was working with a client, big real estate client. And he says, Hey, have you ever heard of this book? Profit first. I'm like, no, he says, he sounds just like you. He says the same things that you say. I said, okay. So he gives me the book profit first.

I put it in my backpack because I'm on the way to the airport. So I get on a plane, go to its conference. I get out of the conference, walk into the vendor area. And when you know it, there's profit first booth at the conference. So I walk up to him and I'm like, I have your book in my backpack. And they're like, have you read it?

And I'm like, not yet, but I will. So I read it and man, it's, it just rang true with everything that I believe. Everything that I think. Business owners need to understand, dispel those myths that are out there. And I obviously grabbed ahold of it because it's been very helpful to me and my business in my personal life, to my clients, and hopefully I've helped some other people.

Profit first professionally, or hopefully I'm doing something. And I love working with you, Michael and your group. Yeah. 

Michael Walker: What's interesting too, Bill, is there might be two two perspectives that we'll speak to today. One perspective that I think everyone, it's true for everyone, is that if you have a music business, then like you, you need to be making a profit and you need to be thinking about. Revenue and it's an important need. So that's something I think a lot of us can understand and resonate with is like the need to make a profit.

The second thing that I think we'll probably need to speak to today is just around the idea of profit in general and also like your money mindset and framing what it means to make a profit. Because I think for a lot of artists there might be a little bit of a sense of, being afraid of the idea of focusing too much on making money or not wanting to come across as salesy or lose touch with the art because it might feel like focusing on money is somehow at odds with that.

So I think you're going to have a really valuable perspective on both, but I would love to hear you describe an overview of the profit first methodology. What is it all about? 

Bill Litster: With most small business owners, whether you're a musician or anything else, we are raised with this idea that if you have a business, you have sales and revenue and you pay all your expenses.

And then if there's anything left, that's your profit and that's what you get. So you work your whole life to try to have these leftovers, right? That is a crazy myth because the reality is if you can't put food on your own table, you're probably not being successful in your business. So profit first turns the formula around and it basically says, yeah, let's bring money in, but then let's take the profit out first.

If we want to be 5 percent profitable, let's take 5 percent out right on the front and force the business to live on the rest instead of hoping there's 5 percent left. Cause there's always something else. There is always something else that money will go to. So I liken it to, if I give you a hundred dollars and I say, go to a show, go to dinner, have a great time.

You would do that. But if I gave you 95, you'd still go to the show, go to dinner and have a good time. So if you can do it on 95, why do we spend a hundred? Because we have a hundred. We spend it. Unless we take it out first. So the idea of profit first is take that out first pay yourself first. Don't be the lowest paid person in the world get paid what you're worth make the business function on what's left after the most important person gets paid which is you so that's the premise It's a cash flow management system.

And that's really what it is. It's a system It's a recipe. You follow the system, you can be profitable day one, right? And we can build that profitability from there. Make sure all your taxes are covered. Make sure all your emergency funds are in place. All those types of things will just happen if you follow this simple system.

And it really is quite simple once you get it put in place. 

Michael Walker: So love it. Yeah, there's something powerful about that idea of setting up your environment in a way that what you want to have happen just happens on its own. Like it doesn't require any extra willpower or effort. The easiest path is that it just, it happens on its own and it seems like part of the magic of it is that it's all about that. It's about setting it up the system so that you can't help it be profitable because it's the very first thing you do is you take out 5 percent or 10%, and pay yourself first before saying, this is what's left over for expenses. 

Bill Litster: It is. It's all about mindset.

And you mentioned that before, but you have to get yourself in a place where, for example, I run into a lot of artists and small business owners. And they're not making any money and their first thought is there's something wrong with me i'm doing this wrong I'm, not good enough. Maybe I shouldn't be doing this.

I think every artist has said that I don't know how many times right? But you have to first mindset changes. It's not you. It's the system if the system isn't working change the system, right? Because you'll work just fine as long as you follow the recipe that creates profit. And that's what we do. We teach people, quit thinking about profit as the end result, or profit as the measure of whether you're successful or not. Profit is a byproduct of running a system, and running it well, and sticking to the recipe. You bake a cake, you put the ingredients in, you follow it, it works. Right? Same holds true with money. We just have to tell the money what to do instead of it chasing us around and telling us what we can and can't do.

So different way of looking at it. 

Michael Walker: Yep. Yep. I love it. It's great too. When I first started implementing profit first in my own life, you know both for my personal life and for my business. Some of the stuff that I've really wanted to be automatic like some of the account like automatically moving money to like different accounts based on those percentages, now there's tools that are even dialed in to make that happen like Relay.

So it's really, so it's really cool. Maybe we could talk to you a little bit more, we could dive deeper into that idea of, you described one of the, pieces that makes profit first work. One of the reasons that it holds back most people from never making a profit or actually losing a lot of money is that we tend to, if we pay profit last, there tends to not be any because we end up spending all of the amount that like we have available to us.

Yeah, I've heard this described as parkinson's law that it's almost like water, it fills a container, whatever container you put it in, water is going to adapt to fill that container. And it seems like there's something similar that kind of happens with, if you have, like you said, a hundred dollars, then that's the container.

And if you know that you have it, then you're probably going to spend that. Could you go a little bit deeper into that specific idea around like Parkinson's law and 

Bill Litster: Parkinson's law? Yeah. It's, another way to explain that is. If you get an assignment and you have two weeks to complete it, it will take you two weeks.

But if they say it's due tomorrow morning, somehow you find a way to get it done tomorrow morning, right? Our use of a resource directly seems to correlate with our availability of the resource. We have two weeks, we take two weeks. If we have a hundred dollars, we spend a hundred dollars. With Parkinson's law, what we're saying is let's limit our available resource.

So if we're going to say, I'm only going to live on 99 out of 100 or 95 out of 100, let's take that 5, put it somewhere else, put it in another bank where we can't see it out of sight, out of mind. And then we only see 95, so that's all we spend and we figure out how to live on that. The 401k greatest savings plan, most successful ever made, whether you like them or not, it doesn't matter.

And the reason that successful is they take it out of your check before you ever see it, and they make it extremely painful to ever get to that money. 10 percent penalty or it's ridiculous. But nobody ever came home with their paycheck and said. Hey, honey, here's my paycheck and those guys took another 500 out for a 401k.

They don't do that. They go. Here's my check It's 4, 500. Let's put the budget together. They never think about that other 500 because it got reserved somewhere else. Parkinson's law we work with the resources we have available. Profit first we Allocate money into different envelopes, different buckets, and we only run the business off the bucket for operating the business, right?

Kind of the envelope system, if you do that personal life and you have your grocery envelope and you have your rent envelope, when you go to the grocery store, you only take the grocery envelope. That way you never overspend, right? And some weeks you eat good and some weeks you don't, but you work with that envelope.

Profit first, we put a system in place that forces us. to Get the business in line with the resources that we have, but we've already reserved profit and paying ourselves and covering our taxes before we get to that pool. It's not one big pie anymore. We deal with the piece that relates to the operation of the business makes all the difference in the world.

Michael Walker: So good. So one thing, We're talking about accounting here. We're talking about numbers and accounting. Hopefully, this will come across as we, describe it. But I would love to hear you talk a little bit about and maybe it would help people grasp the system a little bit more, just understanding the different buckets you're talking about, those different categories.

And, for a lot of people part of the journey for them is understanding that their music is actually a business and that to operate a business, that you have these different, these types of accounts that you might want to consider.

So I think this can be really helpful for people to really start to understand some of the ins and outs of establishing their music as real business. So could you share a little bit about those different categories and how the profit first system works with those. 

Bill Litster: I will. And I love what you said about numbers, and this is the counting and people get freaked out with numbers. One thing I've learned, I don't see numbers as numbers anymore. I see it as a story. Numbers tell a story. And if I understand the story, I can change the ending. And that's what this is about, right? So in the profit first world, what we do is instead of having one giant bank account and money, all the money goes in there and all the money comes out and we hope there's enough left for whatever bill is coming up, right?

What we do is we set up five different bank accounts. Okay. One of those accounts is called income. every deposit we get for revenue, everything we earn gets deposited in that income account. That's all it does is it holds all of our income. Okay. And then we have a set schedule, whether it's once a week, twice a month, we come up with a great schedule for that.

And on that day we allocate money into the other four accounts and those other four accounts are profit. Because profit is first, right? And we put some percentage of that income in the profit right off the bat before we do anything else. That's mindset as well, right? So we put one percent, five percent, whatever it is where we're at in that system. Second account, it's called owner's compensation. Okay. For me, that was the money to buy milk that I didn't have. If you want to focus on your music, you want to focus on the art. You want to focus on your business. You got to not worry about where your next meal is coming from.

Owner's compensation right after profit. We put some percentage in there to make sure your basic life needs are met. Third account is taxes. Government seems to think they have to get part of your money. Okay, and there's nothing worse than Getting the end of the year, you get your taxes done and your account says, Oh, look, you did great.

You only owe 15, 000. And you're like, I don't have 15, 000. You're borrowing money to pay your taxes. And the profit first model, we're going to already allocate some percentage of that revenue into a tax account that we keep out of our way so that when those taxes come due, it's already taken care of.

Don't have to worry about it. And then that last account, that fifth account is op ex operating expenses. So after profit, after the owner gets paid you, and after you're set aside, so you don't get burned by the IRS, you have amount of money left. This is where Parkinson's plan kicks in, right? Because that is your world.

Instead of looking one big account, you can look at that op ex account. That's what you run your business on. Okay. You need some supply. It comes out of that OPEX account, whatever percentage that is. And for a lot of businesses, that's your biggest percentage, but it's not a hundred percent of everything anymore.

You already took care of the important things first. So that's the way it works. One account for income and then four others, profit, owner's comp, tax, and OPEX, each performing their function. In a system like Michael said, you can automate it. The money will come in and automatically get put into those accounts if you're using relay, which I totally recommend.

It's an awesome system. Okay. And then when you do what most people do, and you log in the bank and say, what do we got? You're looking at the OPEX account. And you start running as if that's all your money. Cause reality it is, that's what you have to operate on and you can eat and eventually you can go to the Bahamas cause your profit builds up and you get a reward, which is also the best part of profit first, right?

So that every quarter you as the owner, get a bonus of a good chunk of what you've reserved in that profit account. You took the risk, you get the reward. That's what it should be in business. Is that good? 

Michael Walker: So good. Yeah. Hopefully the people who are here right now are able to grasp how much of a fundamental shift it is setting up the system. Because from day one, yeah. As soon as you like set it up, like it just, you can't help, but be profitable. If it's 1 percent or 5%. 

Bill Litster: You'd be amazed how fast 1 percent builds. 

Michael Walker: Absolutely. And so another topic, I feel like there's a few different directions we could go here. Also I should mention with the live audience, if you guys have any questions, I'd love to hear from you.

If you put a comment in the chat we're going to be doing some Q& A at the end. So definitely I'd love to hear from you throughout the throughout the live interviews. So let me know if you guys are still with us. Give me a... Yeah! In the chat. And again, if you don't see it, it's in the top right.

There's a little chat button you can click on, and you should be able to come on here. Jared points out he sees your guitars, Bill. 

Bill Litster: Yeah. Yeah. That's my, one of them's a banjo, actually. 

Michael Walker: Ah, look at that. CRD, Scott, oh yeah. Drop your questions in the chat for Bill and Michael. Sweet! Alright another question I wanted to ask is around debt and paying off debt.

I know for me personally, when I was starting the business, I invested a lot of, money into, really into good things for the business, like coaching, mentorship, so we wouldn't be here now if I hadn't invested, early on. But it was, a big weight on my shoulder. I remember feeling I was about to be a dad and I was at all this debt and it was a big challenge.

And so one of the biggest benefits I got from the Profit First book was just around the mindset around debt management and how to pay off debt. So I'm curious to hear your perspective on and the Profit First methodology as it relates to debt and paying off debt. 

Bill Litster: Okay. If the first myth we got to dispel is that owners pay is the leftovers, the profit is leftover.

The second one is you got to spend money to make money so go out and borrow money and it'll automatically make you money. Not really true, right? But most people end up getting into some debt, especially when they start into a business. So some of the processes we do. To help with it. And if we have time, Michael, we could talk about the three kinds of debt because there are different kinds.

All right. And not all of it is bad. But when we have debt, rule number one in the profit first system is stop. No new debt. We just say, we're going to draw a line in the sand and say, I'm not borrowing anymore. I'm going to, I'm going to get out from under this, get it off my back and I'm going to grow responsibly, going to grow responsibly from that point on.

And so we stop that first of all. Okay. And then we implement a strategy to get out of debt. And there are a couple of ways we do that. One is standard Dave Ramsey. Debt snowball, right? We attack the smallest one first when we get done with that one We take that payment and apply it to the next one so we're paying extra on that one when we're done with that one.

We keep doing that till we're done. Okay Perfect. Excellent Second thing we may do though is we might actually open up we talked about five bank accounts. We might open up a sixth I have a number of clients that do this. We call it the debt killer. And they just, 

Michael Walker: that's what I called mine. The debt destroyer.

Bill Litster: Yeah. And what we do is we, we're putting 1 percent in profit. We're putting some money in all of these things. We'll just put one or 2 percent or whatever we can into the debt killer. And we just add that on top of our payment we're already making, that money's coming out of your OpEx account one way or another.

You're going to pay that debt. We might as well get rid of it faster. And the best way to do that is to allocate that funds let it go automatically into account that's just going to hit that debt hard. When we get to our quarterly bonus that we talked about, we generally have people take a good chunk of their bonus and pay down the debt.

We keep some to celebrate. You got to. You got to celebrate, right? But we will learn to get more joy out of saving than spending. If you get more joy jumping around, cutting up credit cards than you ever will writing a check to pay the credit card bill, it's fact, right? And yeah, so we're going to, we're going to get joy out of, sending that money, getting that debt down, knocking it down and not letting it get us again, right? I mean I have one client right now if he didn't have his debt he'd have thirty thousand dollars more a month. That's what he's spending in debt service. What can you do with thirty thousand a month a lot right? And so we're making a plan you know getting get him out of debt.

So whether it's a thousand dollars, thirty thousand dollars, a hundred thousand dollars million dollars strategy to get out and then you work the plan. My mentor used to say plan the work, work the plant. That's what we do. All right. And the beautiful thing is once the debt is gone, Freedom man, not just emotionally off your back but you have resources you didn't have before and this is where it gets fun because now instead of debt destroyer we can turn that into new amplifier new whatever and we just start setting money in there and instead of going to debt, we're now building up money to buy those things that we want and we have a strategy and a plan for how we're going to do it right and we're in control. One quick thing on mind.

This is the end of the quarter, right? So I just did my profit bonus. And what I try to do is I don't like car debt, right? So instead of making a car payment I have a vehicle bank account and I make a car payment, but I put it into that money market account so that after three or four years of making that payment, I have enough for a new car or whatever, and that works really well.

So my last thing I just, we had a car die. I didn't have quite enough in there. My profit bonus was enough. I don't have any car debt. It's gone. And I can't even tell you the freedom that gives to not have debt hanging over you, right? strategy. It's all good. 

Michael Walker: Awesome. Yeah, I love this. One thing that I feel like is so powerful about the profit first methodology is also how it's not necessarily just like a business principle for how you manage your business, but also you can apply so many of the same lessons to your personal income.

And you can think about it really, it seems like a way to programmatically live below your means, so that, yeah, so that you don't have to ever feel like you're tight or you're, like, essentially like it builds in the bandwidth and yeah, and then from there you have, like you're saying, so much more freedom to be able to stretch in the opposite direction.

Bill Litster: Yeah. If you were to look at my bank, I have 15 accounts. My personal, right? And that's because what always gets this the unexpected, the broken arm, the, what, and he's like, how am I going to come up with the deductible now that I got to do? And so I set up a medical account.

So instead of getting hit by bills, when they come in, I already put a certain percentage into that account. When the medical bill comes out of nowhere, it doesn't have to come out of my normal pay. I already have it. I love to travel. I already know I'm going to spend three, four thousand a year. If I can go to Europe, do something right.

Since I already know that I'll, I have an account and I just put money in there. And when it's enough for me and my wife to go do something cool that's when we do it because we reserved for that. But I have those for everything, emergencies, that, gonna buy a car, that's another one, this strategy works, right? Not only does it work for savings retirements, another one we can start building at. But it is a strategy, a formula, and a system to implement it. It sounds cliche, but the goals and dreams you had when you got into business or doing what you're doing or playing your music, the goals and dreams of your life, they will come about because you proactively did something to enable that to happen, right?

We can't wait around for there to be enough profit left at the end of the month. It doesn't happen. Sometimes it happens, but not everybody is superstar, right? That's okay. We can make a living and do what we want to do and achieve our goals. And that's why I'm in the business I'm in, right? One, I love helping people do that,

I can help musicians and music people do it and play songs with them. Man, it's living the dream, it really is. Any of you guys want to play a song, jam, and save money, I'm your guy. 

Michael Walker: So awesome. All right, hey Bill, we've got some folks here who are asking some questions in the chat.

How about we move on to our Q& A? If you have any questions, this is the time where you can raise your hand. We can start with a question from Scott Landis. So Scott asked is there a minimum level of income needed to set all this up? What if revenue is more or less like a roller coaster? Some months are good, some are not so good.

And the revenue is going up and down. How does Profit First play into that? 

Bill Litster: That is a great question, Scott. And as far as the minimum, I will tell you this. The best time to start it is in the beginning when you have nothing because then you develop that habit. Right away.

I'm speaking in Israel actually in two weeks about profit as a habit and that's the same thing. If you start right away putting a little bit of every dollar into a profit account you're gonna be way better off than trying to retrofit it later on. So that's answer one there's no minimum amount. Okay, and as far as the up and down thing, that's the artist's life, right?

But it's also the life of seasonal businesses. They have the same thing. The lawnmower company sells more lawnmowers in the summer than they do in the winter. So we have strategies for that and profit first. And one of those is just briefly is we'll set up an account and we call it, we can call it our seasonal account or our timing adjustment account, whatever it is, right?

And and we know what our, what we need to live on, right? We know what we got to feed ourselves with. So we take that on months where we have more than that number, instead of just saying, Oh, I got extra, I'm going to go buy this. We put that money into this seasonal hold account so that when we have a short month later on, we can just pull some of that back and even out our cash flow in our personal life.

Makes all the difference in the world. Okay, because the main point is as long as we have enough in a year It's just a matter of putting it in the right time zones to meet our needs right instead of having the hills and the valleys we even that out. We have whole strategies around that and one short thing there I had a client that actually was in the lawn tractor business still is he one month he was like It's a great month.

And I said, what are you going to do if next month you're 20, 000 lower? And he said yeah, he's bragging about it. He said, we always figure it out. We'll figure out a way to, to survive. And I just said, if you can survive on 20, 000 last next month, why are you not living on 20, 000 less this month and putting 20, 000 in your pocket?

It's oh my gosh, never even thought about it. It's a strategy, but there's a seasonal plan. We can work through that with people. 

Michael Walker: Super smart. Yeah, you know what kind of reminds me of is, it seems like one of the cornerstones of the strategy is around out of sight, out of mind, and, like you said, resource allocation, and just, as a thought experiment, just bringing that down where it's like, If you had half of that, would you still survive?

Could you still do it? Obviously Elon Musk is a controversial figure. Not everyone Likes Elon or agrees with everything he does, but the example of him purchasing Twitter and then, essentially cutting down on a bazillion expenses is a good example of everyone's oh, he's gonna die.

It's gonna break. It's not gonna work anymore And now, not only is it working, but they have higher monthly active users than ever before. The business is doing better than ever before, and they have a fraction of the expenses they used to have. But the other thing that it reminds me of is in our house, all of our snacks and our sweets, I know that if we just had them out in the open.

They would get eaten, if we had like puppy chow and and M&Ms and stuff, which we have. But if they were just like out in the open, they would get eaten. And I know that because I've been there , like I, I'll eat those m and ms, but we on Amazon, we got these lock boxes that you can stash away your goodies and your sweetss.

And technically it's still possible to get them, but it's just like a few extra steps where I have to unlock it and I have to try to remember what the code was and I have the code like hidden and that's made a huge impact in terms of I very rarely will I don't have the same issue of binging on sweets or snacks because they're not as accessible.

And so maybe you could talk a little bit about that strategy around, profit first and money. And how does someone set it up so that a portion of those funds isn't accessible, but in an emergency situation, they'd be able to, take care of themselves. And maybe that can go into the quarterly dispersal a little bit.

We could talk about that bonus structure.

Bill Litster: Yeah. So one thing that most people do, not just business owners, most people do this, right? If you're worried about money, what do you do? You log in, pull up your bank account, see how much money you've got there, right? So one of the key principles of profit first is that we set up a two accounts, profit and tax in another bank.

That's not the same bank. So when we log in to see our money, we're not seeing that money because if we see it, it was like, Oh, I can just borrow that, but it's not there when you log in. Number one. Okay. And then we try to make it so it's not easy. That other bank, we tell the other bank before you let me take this money out of here, we have to have two signatures on it.

And I actually have to come into the bank or whatever it is. You come up with some system just like your lock box, right? I have to go through these two or three or four hoops before I can get to it. Okay. And it's not that you can't get to it, but as human beings, hopefully by the second or third hurdle we have to go over, we've had enough time to think through, is this really the smart thing to do?

Or is there another way? Innovation is something that's totally gotten lost in today's society. We tend to grab the easiest, lowest hanging thing. But if it's harder to get to money, we tend to innovate and figure out another way. Another way to make payroll. Another way to get whatever it is we're trying to get.

So that's the whole thing. Keep that out of sight, out of mind, not easy to get to, but you can when you need to, or at the end of a quarter. So the end of the quarter we do two things. One, we might make estimated tax payments if we need to, and that'll come out of that tax account money that's over there.

And two you've been working like a slave to make this business work. It's time for a year reward. You took the time you disciplined yourself to put that money profit first, hold into that other bank. Half of that money's coming out to you as a bonus. In addition to all the money you got all along the way, and your owner's compensation, it's meant to be extra. It's meant to be the weekend away with your spouse. It's meant to be the dinner at a nice place that you wouldn't normally go to right? That reward. Getting out from under the personal debt. That's a reward, and so it grows over there, and you know when you've taken a couple of bonuses out of there you figure out you don't want to mess with that profit account you leave it alone because that's a good day.

All right when you pull that bonus your employees get bonuses. Why shouldn't you?

Michael Walker: Yeah, that's there's something so powerful about creating, there's a specific term for this, I don't remember what it is, but it's basically creating moments or experiences or things that take you out of your normal day to day habits and in sort of your routines, every once in a while, you do it strategically.

And you could, maybe it's called horizon experiences, like creating horizon experiences. And it seems like one of the benefits for me that I've experienced from having the quarterly dispersal is that quarterly dispersal, like you're describing, it really feels like it's something extra or comes out on top.

You get used... To the other income that's, paid out regularly and that's what you plan your budget around. That's what you plan your normal day to day life around. And so when you have that extra quarterly dispersal that comes out, it really feels like it's something extra or on top. And then you're able to create those horizon experiences and yeah it's awesome. 

Bill Litster: Risk reward, man. You got to have the reward, not just the risk. 

Michael Walker: So another good question I'd love to get your perspective on, Bill, is...

Yeah, you've been doing this for a while now and you've had a lot of experience, working with different businesses and different types of businesses and seeing them implement profit first. You've probably seen the ones that have successfully implemented it. You've seen the ones that have struggled or made mistakes and probably a lot of the same mistakes that are common reoccurring themes.

So I'm curious, what are some of the biggest the biggest risks or the biggest mistakes or the things that we want to make sure that we avoid on the path to implementing profit first. Okay. Pitfalls, the pitfalls to avoid. 

Bill Litster: There, are a few, I'll give you the two biggest one. And if we have time, we can talk about some others, but probably the number one biggest problem, which I won't even work with people anymore if I find they think this, because it never works.

And that is, they say. Why do I need to open up bank accounts? I can just keep track of it on a spreadsheet and I can say this much is going here and I won't spend it. I'll only spend the money I put on my spreadsheet in this category. It doesn't work, right? There is some magic in the actual putting it into a bucket and putting that bucket behind a wall where you can't get it, right?

That's the magic, the secret sauce that, that makes it work. Okay. So yeah, follow the system, open the accounts. That's the biggest thing. Second thing I would say is people start too aggressively. In other words, you might be, you might look, if you read the profit first book, it'll say, yeah, really healthy company of your size should have 10 percent profit.

And then you go, all right, I'm just going to be 10%. I'm going to allocate 10%, but. If you're minus 5 percent today, you don't become 10 percent profitable just because you wrote down on a piece of paper. Now I'm 10 percent profitable. So we want to create success. And so we'll basically usually start people start at 1%, right?

And then when you get comfortable and you're seeing the success of that, then we'll bump it to two to three to five and we'll work our way up. Okay. So bitin off more you can chew right away and then when it doesn't work, you think the system doesn't work. It's not the system doesn't work. It's just, you try to play for an NFL team when you're in little league.

Michael Walker: You're saying if I set my profit at 95 percent today, then it's not going to, it won't just happen that way.

Okay. 

Bill Litster: Sorry to say it just won't happen that way. Okay. Third one real quick is the stealing from yourself. One of the main points of profit first is if there's not enough in your OPEX account, it's time to make a change, cut your expenses, figure out a way to get more revenue. Don't just go borrow more money from yourself or somebody else, because you're not changing your world.

You're just postponing the downfall. And so most people make a mistake or two and borrow a little bit first time, but we work past that, and stay with the course. It does work. You've got to trust the system. So what else we got? 

Michael Walker: Yeah, absolutely. So let's keep on going back to our audience here and see if we have any other questions from folks here in the chat. I would love to actually, if someone wanted to raise their hand and bring you on here on the stage, that would be especially awesome. So let me know in the chat if you're brave enough to actually come on here and ask a question, that would be awesome. And just like that, I see a hand raised Peter Wilson. What's up Peter? Let's bring you on here live. Alright, so I just invited you to speak so you should see something on your screen that lets you actually come on here and ask a question.

Hey Peter. 

Peter: Hi Michael. I always enjoy these things. And I'm finally beginning to wrap my brain around Discord.

It's appropriately named, I think. Anyway I have, I wear a lot of hats and so I'm not sure which business I would be talking about at any given point. I am a musician and I've always done that, but I've also been a concert promoter and a booking agent and I have a rental house. And it's hard for me to wrap my brain around what's doing well and what's not doing so great at any given moment.

Bill Litster: Good. That's a great thought. 

Peter: Is there a way to parse things so that, how would you do that in QuickBooks? That's what I guess I'm running down. 

Bill Litster: You are speaking my language, man. First of all, Peter, I will tell you, I work with a lot of musicians, but I will tell you what, most of them are like Michael, right?

You're a musician, but you also have this other business and you also have this other business because, and a lot of times they're business related. I work with the bass player for John Mellencamp, but we don't, I go to Mellencamp with him, go backstage. It's cool. But when we work business, we're working with his music school that he runs.

So other businesses, this is all good. It's all one package in your life. And so what we would do in QuickBooks is we can set it up to track, we call them business lines, right? We'll have each business line track separately. So when revenue comes in from this line in QuickBooks, we can use a class is what it's called, and we can class that money as real estate.

We class this money as concert promotion. We class this money as performance revenue, right? And then we attract we track the expenses in line with those. So then I should be able to run a report that says, what's my profit and loss from real estate? What's my profit and loss from concert promotion? And, we set people up with that all the time, right?

Peter: So setting people up, I'm a little curious about, should someone become a client of yours, what happens then?

Bill Litster: Is it okay for me to talk about that, Michael? Of course. Of course. The way I usually work with people is we usually do a free evaluation where we go and get to know them, figure out what it is they got going on, how they're currently tracking, and what they want it to do, what they would like to see, right?

And then usually I can tack on and say, wouldn't it be also good if you did this, because there's a lot of people just don't know what they don't know. And once we define that then we work out a plan on how to get them from where they are now to that right and sometimes that's training and educating them how to do it themselves sometimes it's training them and educating them then we do part of it and they do part of it. And sometimes it's we educate them and we do it because they say I'm gonna go out and play my music You just keep track of it for me, and that's okay.

Peter: At some point we play tunes.

Bill Litster: Yes 

Michael Walker: Every time we have a meeting with modern musician and Bill there's always tunes that end up being played.

Bill Litster: There are always. Michael has written some great music and he's helped me with some of the stuff...

Michael Walker: He's Bill! He's Bill! The man with the plan! That was the first song I wrote.

Peter: I'm gonna go get my guitar. 

Michael Walker: Oh yeah. Oh yeah. Cool. Peter, thank you for coming on here live to ask a question. Yeah. 

Peter: All right. 

Michael Walker: All right. Beautiful. You always need someone brave, someone like Peter is going to come on live and be the first person to ask a question and work through the technical difficulties that almost always happen the first time you do anything. So shout out to Peter. Virtual round of applause. I would normally do a sound effect for a round of applause, but for some reason that one went missing. So now all I have is, Oh. How cute. All right. Scott asked a question. He asked, is it possible to use relay for personal accounts as well, or is it just business? 

Bill Litster: It's, it is built for businesses. But there's no reason in the world you couldn't sign up with your social security number and say your business is your name because it is life is business.

Yeah, absolutely. You can, but it is geared towards businesses. 

Michael Walker: Yep. And Scott I also, I use relay for both. Yeah. Technically relay is a business bank, but they're just the best bank that I've ever used. They're awesome. 

Bill Litster: I've used a lot of banks and yeah, they're, they are the easiest and the best and in line with money management, that's what we're about.

Michael Walker: The thing that's so amazing about Relay is that they they can, I wanted this for so long and I was, I looked everywhere on all the banks like, and they didn't have the ability to do this, but really it was the first one I was like, yes they let you automatically set those percentages from profit first and then immediately without you even having to touch it or do it it'll based on the percentage that you set, it'll move the money from your income account for you.

So just another way to totally automate this to happen so that you don't have to think about it. You don't have to manually move the money. That was one thing I had never seen with another bank, but relayed is just so easy. 

Bill Litster: Yep. And you can also automate it. If you have a business, you can automate it to pay you out of your owner's comp account into your personal account.

Whatever interval you want. You can build this thing all the way down to whatever level you want. And all you do is make sure the money goes in and it does it all. It's beautiful. 

Michael Walker: Pretty dang. Cool. Alright, I think we're about time to wrap up for today. But Bill thank you so much for taking the time to come on here and share some of the lessons that you've learned and really the profit first methodology and the fundamentals the lifestyle, the system that kind of goes with it. 

Truly, I think it's probably one of the most valuable frameworks that I've ever learned. The book is definitely in the top three for me of like life impacting books. Thank you for being a part of that and sharing that message. And, being such a amazing part of modern musician as well.

For anyone that's here right now who is interested in connecting more, or they heard about the free consultation and they're like, that sounds awesome. I would like to, set up these systems. I would like to be able to profit first. Where can they go to, to connect more and dive deeper? 

Bill Litster: You go to my website is betterbizinfo. com. And right there on the front page is a button to schedule a free call. You can do that. I also have once or twice a month, I do some free workshops where we go into a little more detail and what Profit First is about. So you're welcome to sign up for one of those as well. But I'd love to talk to any of you.

I'll block some time with you and learn. I'd love to learn about what you're doing and your art and your business and everything so, i t's fun. Awesome. Betterbizinfo. com. 

Michael Walker: Betterbizinfo. com. And betterbiz is like B I Z, right? B I Z. Yeah. Betterbizinfo. com. And I can say, Bill you are someone who takes the world of accounting, which I think a lot of people traditionally think of accounting as not necessarily being like a super fun, entertaining thing.

I love our sessions. I just have so much fun. And it's always like music is at the core of it as well. And you're a music lover yourself. Yep. Just from a personal standpoint, I couldn't recommend Bill higher for anyone that is looking for someone that can help in this specific area.

And like always, we'll put all the links in the show notes for easy access. And Bill, thank you again for taking the time to be here today. Thank you, 

Bill Litster: Michael. Been fun. 

 

 (hero journey, profit first) 

Bill Litster:

 We are raised with this idea that if you have a business, you have sales and revenue and you pay all your expenses. And then if there's anything left, that's your profit and that's what you get. You work your whole life to try to have these leftovers, right? That is a crazy myth because the reality is if you can't put food on your own table, you're probably not being successful in your business. So Profit First turns the formula around and it basically says, yeah, let's bring money in, but let's take the profit out first.

 (profit as a system, mindset) 

Bill Litster: It's all about mindset. I run into a lot of artists and they're not making any money and their first thought is there's something wrong with me i'm doing this wrong I'm, not good enough.  It's not you. It's the system. If the system isn't working, change the system,  because you'll work just fine as long as you follow the recipe that creates profit.  Quit thinking about profit as the measure of whether you're successful or not. Profit is a byproduct of running a system, and running it well, we just have to tell the money what to do instead of it chasing us around and telling us what we can and can't do.

 (parkinsons law and profit first methodology) 

Bill Litster: 

We put a system in place that forces us to get the business in line with the resources that we have, but we've already reserved profit and paying ourselves and covering our taxes before we get to that pool. It's not one big pie anymore. We deal with the piece that relates to the operation of the business makes all the difference in the world.