075: Proper Accounting for an Online Course Business

Just about a year ago, fellow course creators Tim Geiss and Nate Dodson were on the podcast with me talking about a book I just finished: Profit First by Mike Michalowicz. It sparked a great discussion about handling some very important aspects of having your own business, and since I’ve now been using the profit first system for a year, I wanted to revisit this topic with you.

"Sales are a vanity metric. They don’t mean anything unless you put them into context."

-Tom Geiss

As evidenced by my continued implementation of what I learned from Profit First, I am a big fan of this way of accounting. It works, and it’s relatively simple to begin using. I hope you enjoy this blast-from-the-past episode – and maybe even consider changing your accounting system as a result. Let’s jump in!

In This Episode, We Talked About:

• (1:48) The accounting system I use
• (2:54) The underlying concept behind putting profit first and what that means on a practical level for my business
• (4:16) A recap from my conversation last year with Nate and Tom about Profit First
• (5:10) Tom’s reasons for implementing this accounting method and how he feels it benefits his business
• (7:39) How long it took for me to start implementing profit first and how often I initially was revisiting my system
• (10:28) The business credit card that all three of us have found useful
• (11:46) Why you can still use this system without rigidly following every single guideline
• (12:55) Nate’s question about how Profit First actually benefits businesses and my early takeaways
• (17:59) The minimum percentage of profit that this system has you start putting aside each month for emergencies
• (19:44) How putting profit first helped Tom feel less uptight about spending money on growing his business
• (21:36) The way this process allow for a steady personal income and regular bonuses despite monthly profit fluctuations
• (25:38) Tax implications for different types of business structures
• (26:44) The difference between being an employee and an investor
• (29:42) How using the profit first system affects operating expenses
• (31:17) A mistake I probably wouldn’t have made if I was using this system earlier
• (32:03) The role of a business emergency fund in Profit First context
• (35:21) “The Vault” - an advanced profit first technique
• (36:12) Why this system keeps profit and tax accounts separate
• (38:10) How putting profit first could benefit one of Nate’s other business
• (42:23) Moving from the owner-operator role to being an owner working on the business rather than in it
• (43:18) A quick look at FICA accounting
• (47:14) How the profit first concept works as you initially implement it
• (48:36) The percentage of revenue to set aside for taxes and other categories
• (52:33) The main point of Profit First
• (53:18) A tip from Tom on operating expense decisions
• (56:08) The best type of bank accounts for profit first accounting
• (57:56) How the profit first concept could work for businesses beside online courses

We discussed all that and much more, so don’t forget to leave a comment and let me know what you enjoyed about today’s flashback episode!

Links

• Bonjoro Free Trial
• Profit First
• Piano in 21 Days
• The Online Course Guy