A (18:52)
Yeah, I'm glad you pointed that out. And also these visuals are also in the book as well. If you happen to have the book or see the book or the workbook, these same visuals are in there. So the income account is all your sales get dropped in there. So your, your point of sale, your credit card terminal, your cash, if you bring it to the bank, and I hope you do, all those things get dropped in like a big huge pile of money. So the way I like to describe this is like just pretend like everybody pays you in cash. You're a cash only business and you just throw all this money in a big pile on the floor. That's your income account. Then you're going to take whatever your sales tax or meals tax percentages, you can take that right off the top. Why? Because it's not your money in the first place. It was never your money. And we are the trustee and we have to set it aside. So in this example, in the parentheses next to my meals tax account, I have a 7 because in the state of Massachusetts, 7%. So we put 7% aside of that income account. So we have that taken care of for our meals tax, then we have our cost of goods account and then our payroll account. Those are our prime cost accounts. And for this restaurant example, we know that they're running a 31% combined food and beverage or cost of goods account and they run 30% payroll. That's why I put them in parentheses. It kind of reminds them what they need to transfer to those ounce. Yours might be 40 and 20. The maybe they're like 36 and 48. I hope not. They could be. You figure out when you do an assessment of your business what your percentages could be. And we'll get to that in just a few slides. So we transfer that money to those accounts and then it looks like this. So now our income account went down because we just, we just allocated or transferred money out of it. And we put aside money for meals tax. We put aside our 31% for our cost of goods, and we put aside 30% for our payroll. Now we funded those accounts. What's left in that income? In our, in our example, it's the 4659 is what we call real revenue, also known as gross profit. That's the money left over that you run your business on after your prime cost. Your sales tax is taken care of. So that's what these other parentheses stand for. These equal 100% of what's left of the real revenue. In our example today, this was Lucy's bistro. It's the one that I kind of bring you through. In the entire book, Lucy was just starting to be profitable or wanted to be profitable. So we're only going to start her at 1% set aside. Because this system is not designed to like wallop you over the head and make you want to jump off a cliff. We're going to beach entry into this. As you make improvements in your business, we're going to increase the profit amount. But when we're just starting out of the gate, we're going to say just do 1% of the real revenue. Just 1%. Because if you can operate your business on 90 and 99% of your business, you can set aside 1%. It's slow rule, and in this case it's 46 bucks. I know she can do it. So that goes to the profit we had 40% for owners pay because that's what she was already making. We were leaving that alone 1% for taxes, which is low. But again, beach entry until we try and find money saved somewhere that we can add. And then the last 58% of that real revenue went to her OPEX account. So now this is what I mean by not only visual cash flow, we watch the money start at the top and flow through based on her business model into these accounts. But now we have this kind of live working budget. Now we know that she's got $3,700 to pay her food and beverage vendors. She's got $3,500 for the payroll for that week. So what if, what if her payroll, she runs the payroll in her software and it comes out that she owes $4,000 for payroll. Right. You can't underfund the payroll. But here's one of the beautiful things about this process is that now in this example, Lucy has to make a decision. I got to put another $400 in that payroll account so my payroll doesn't bounce. Where am I going to take it from? Am I going to take it out of my food and vendor, my food and beverage vendor account like, and piss somebody off maybe? Am I going to take it out of my owner's pay, which a lot of people do right now? Possibly. Am I going to take it out of my OPEX account and maybe not pay some type of due subscription insurance? Hopefully not. Most likely, it's going to probably come out of your owner's pay. And it's in making that decision and being this. And being able to see it visually, it really does kind of change the game on how you're going to work on your restaurant to fix the percentages. Because clearly if she was, if she has to pay $4,000 in payroll, she's not running at 30%, is she? She's running higher. Maybe she's at 32, 33. And I'd rather her know that now and work to change that immediately versus waiting to the end of the month when the books are closed, the percentages come out and you meet with your bookkeeper and then they'll say, oh, by the way, you ran 32% last month. Oh, thanks. Like, I just lost a few weeks. So now we're doing it immediately. It's one, one of the great benefits getting into the brass tacks and how to set up these accounts. Most banks, most. A lot of banks already have heard of profit first. Most are not surprised. I have a printable worksheet that you can, you can have, which you can bring to the bank with you, but it basically tells you what accounts you need to set up. They're checking or savings. And why this is. These should all be free, no fee, no minimum. Checking or savings accounts. Yes, they do exist. We have a list of banks that offer this and you should be paying for your, your bank accounts as far as I know. All right, now we're going to move quickly into the assessment. Like, how do you know what percentages are for you? Hopefully you might on this call. You're probably all veterans. You probably have an idea of what you are really running in your food and beverage, your payroll, etc. But just to do a quick assessment, this is what you're going to do on the screen here. This is also the same one that's in the book. I have a collapsed version of a profit and loss report also called an income statement. Right. So what we're going to take is the total revenue. This is for one year. And this, in this example, it's half a million 500,000 total cost of goods. We're looking for total payroll or labor and then her total operational expenses down here. So that would be like admin advertising, occupancy, direct operating, those things. We're collapsing them down. We're going to come up with amounts for those buckets and then we have owners pay and personal expenses. And if there was any taxes paid, that would be on here. So this is just one sheet. We kind of put all the data together and saying, okay, now we're going to fill out this chart. So this instant assessment chart, again free to you, there's tools you can download for it. And we're just going to fill it in so we know where everything's going. So they have 500,160 in COGS, 155 payroll. That means 185 in real revenue. And here we're, Here we are. Owners pay 74,120opex. She was at a running at a loss of 9,250 for this one year that we did the assessment. So what does that look like? We're going to just do some simple math. We're going to divide each one of these by 500 to get her cost of goods and her payroll. That's where we come up with these caps. Percentage stands for current allocation percentages. Just meaning like this is where the money's been going before you did this assessment. And then down here we take these amounts, divide them by the real revenue to get what her profit. Owners pay, owners taxes and OPEX percentages are. So this is our starting point. We don't want to live here. We want to get better than this, obviously, because we want to be profitable. So then we take this and we're going to put it into another chart. Right before I get to that, I have our Mac Daddy Taps chart on the screen. So if you're wondering, hey, what should I be running at? This is a chart that was developed by Mike Michalowitz, the original author of Proper first, where he, when he wrote that book again 10, 11 years ago now, he interviewed thousands of businesses in different revenue ranges, many of them restaurants, but also across other industries, and kind of came up with what was the average of the healthy business running based off of their real revenue. So that's where these percentages come from. It's a good starting point. You may, may or may not end up there. You know, we want to follow your business model and how you plan to be profitable. That's what we want to get to. But for this example and Lucy's, she would be under column A because her real revenue falls under 250,000, her real revenue. So we're looking for her to be at 5% profit, 50% owners pay 50% taxes, 30% opex, maybe if she can get there. So we put that in this final chart, this is our tax chart, to kind of figure out what we need to do. Now at the top, she was running 32% in food and beverage costs. We want her to run at 30, which means we're looking for a $10,000 decrease across a year. So less than 1,000amonth. Pretty easy to do with maybe some menu pricing, maybe figuring out some menu mixes and food costs, beverage costs, etc. That's not, not too hard to do over a year, period. Same with payroll. She was running at 31. We want 30. We're just looking for a $5,000 decrease across the year. Some light scheduling differences we could probably come up with that. So easy lifting down here is real. The work, the real work is going to be done. In order for us to be able to increase her owner's pay, increase taxes, you know, her tax savings, and then add to profit, we need to drastically reduce her opex. This is where the work is really going to happen. Will she achieve a 30% opex when she's running 65? I mean, probably not, but the work that she's going to use, she's going to do to get her there. That's going to, that's going to transform the business. It's the fine tuning sort of the nickel and diming, but in a really good way because it's going to ensure that she's creating efficiencies, whether it's inventory, whether it's, it's doing away with things she's not using. It's really just fine tuning the business model. So even if she hits 40% or 45, that still frees up about 20% for her to use toward her owners pay taxes and profit. And that's certainly better than where she is now. So the final piece of this is what we do with our clients. You may or may not necessarily need to do this for, if you're doing this on your own. But when we work with restaurants who want to implement profit first we have their starting point, which is kind of like day one. And then usually it takes about six quarters, sometimes four quarters. So a year, year and a half for us to, to get from point A to their point B, which is like the best they can run. Some do it in much less, like I said, but usually we like to give it six quarters because there's really, can be a lot of work to be done there. All right, so you want to talk about case studies, Eric, want to talk about some success stories?
