Since our masterminds online are doing a deep study on the book Profit First this month, I want to touch on a touchy subject for today.
From the heart of a lifelong entrepreneur and business coach, I can’t believe how little attention I paid to the financial structure of any business I ever owned. It wasn’t until I started online mastermind groups that I came across Mike Michalowicz’s book. It was my friend, Scott Beebe, who introduced it to me. That book changed my life.
What many entrepreneurs don’t understand is that business finance has its own set of principles, just like personal finance. Either you work for your money, or your money works for you.
That might not sound too bad if things are going well for you right now, but it’s music to the ears of someone whose business is threatened by our current economic state. If your business’ expenses are fully, or even partially covered by passive income and reserves, it buys you time and speed to adapt to a changing market.
THE GAME OF PROFIT FIRST
Mike’s fond of saying that “Profit’s not an event; it’s a habit.” We teach it to our mastermind groups online, and it boils down to a fundamental question: “Are you paying yourself first?” I recently made a video on the subject.
It’s not very different from personal finance; you have to start with small amounts. Dave Ramsey will tell you to start by putting $1000 in your emergency fund. Mike will tell you to start by saving at least one percent of gross revenue in a profit fund. That’s the “baby step” equivalent.
But you might be wondering how to build up revenue that fast, where you can break even on expenses. That’s a genuine concern we need to address, especially if you’re thinking of entering the mastermind business.
THE NUMBERS OF A MASTERMIND
I always offer up the simplest examples when I appear on podcast interviews, like this one I did recently with John Lee Dumas. I tell people that if you charge $500/month and you can find just 10 people to join your group, your new business grosses $60,000 per year.
Now that may seem like a modest income. By itself, it might be awkward these days, but not impossible. Most people who purchase the product we created to help launch masterminds come from existing careers or businesses. Their main source of income already exists.
They invest in our product, The Mastermind Playbook, to take the sting and guesswork out of it, so that the group does what it’s supposed to do - change lives.
Of course, some people are high-end professionals and elite entrepreneurs who can justify charging more for the knowledge, expertise and relationships you get through membership. Others are business coaches who, like me, want to serve more people than their schedule allows. If you follow the step-by-step instructions we provide in the Playbook, you can bypass all the big expenses and operate at a very tidy profit.
WHAT TO DO WITH THE PROFIT FROM YOUR MASTERMIND
If you agree with what I’m setting forth here, the next step is to make a firm decision about what you’ll do with the profits you set aside in your account. Let’s use the example I gave of $500 per month, with your first 10 members.
If money’s tight in the early days, that means you can get away with saving as little as $5 per member, per month. Maybe you don’t get to 10 members right away. Maybe you get three, then another two, then you have a big month and add four, and add one more at the end of the quarter.
So far, so good. Now let’s say you retain those members, but by the end of the second quarter you have a waiting list. Congratulations, time to start a second group! But where will you get the money to start that second group? You guessed it - you’re firing on 10 cylinders already, with members paying you a solid $5000 per month now. You can put more of that in your profit account.
And if you have that account set up, you’re not dipping into your personal compensation. The business pays the bills, just like it should. So let’s say you saved a $3000 chunk of those second quarter earnings … well, now you have some runway to start your second group. Now you can coach and mentor more people, but you only add a few extra hours of work.
Do you see how that works? You use the same preparation, materials, agenda, processing and everything else we lay out for you in The Mastermind Playbook. But you can use it on more than one group at a time, which doubles your revenue.
If you repeat the success you had in the second quarter, by the third quarter you’re looking at launching a third group, only this time you can come at it with $120,000 in annual revenue and a lot more to spend for setup.
I hope this whets your appetite to finally start that business mastermind you’ve been thinking about. You know it’ll catapult your influence and success. You just need a blueprint to set up your structure, and that’s what we provide with The Mastermind Playbook.