Unlocking Profitability: The Naked Truth of Business Finances

Are you brave enough to look at the real numbers behind your business? In this episode, we’re diving into “The Naked Truth” from chapter three of Profit First—a must-listen if you’re ready to get honest about your finances and build a business that’s truly profitable.

I’m Deb Halliday, Profit First Professional and trainer, and I’ll be guiding you through the importance of facing your business finances with clarity and confidence. It’s not about how big your turnover is or how many people you employ—it’s about how much profit you actually keep. As Mike Michalowicz says, real success is measured by profitability, not just revenue.

We’ll explore the concept of the instant assessment—a simple but powerful tool that works like a financial X-ray for your business. I’ll show you how to compare your actual figures (revenue, profit, owner’s pay, tax, and expenses) with the Profit First benchmarks, so you can spot where money is leaking out and where you need to take action.

This episode is all about helping you get a clear, honest picture of your financial health and giving you the confidence to make positive changes. I’ll share practical steps and relatable stories so you can see exactly how to use the instant assessment to move your business towards greater sustainability and peace of mind.

Takeaways:

• Why profitability matters more than turnover or business size
• How to use the instant assessment to get a transparent view of your finances
• The importance of comparing your numbers to Profit First targets
• Simple, actionable steps to plug financial leaks and build a healthier business

Links mentioned:

financiallyhealthybusiness.co.uk

debhalladay.co.uk

Companies and resources featured:

Accounts Ladies, Accounts Office, Xero, QuickBooks, HMRC

Episode Transcript

(00:09):
Welcome to Profit first withDeb Halliday.
That's me.
I'm Deb.
I'm a Profit firstprofessional and trainer, author
of how to Build a FinanciallyHealthy Business, founder of the
Accounts Ladies, an awardwinning accountancy practice and
the Accounts Office training Academy.
This is the show for businessowners who want to stop stressing
over money, keep more cash,pay themselves more and build a business

(00:33):
that truly thrives.
Just a quick note, Profitfirst is a licensed methodology.
Everything here is designed tohelp you implement it in your own
business.
If you're interested inhelping others with Profit First,
I'll share how you can applyto become certified too.
Let's get started because yourbusiness should work for you, not

(00:54):
the other way around.
Hello and welcome to Profitfirst with Deb Halliday.
I'm Deb Halliday, your Profitfirst professional.
And today we're diving intochapter three of Profit first, the
Naked Truth.
This episode is about facingyour business finances without fear.

(01:15):
It's not always pretty, butit's the key to profitability.
Let's do this.
In the uk, we, we love to askand how big is your business?
How many employees?
How much turnover?
But Mike Michalowicz saysthat's the wrong question.
In chapter three, he arguesthe only question that matters is
how profitable is your business?

(01:37):
Size doesn't equal wealth.
A 1 million pound turnovermeans nothing if you're drowning
in debt or can't pay yourself.
The tool to face this truth isthe instant assessment.
It's like a financial X rayshowing where your business bleeds
cash.
You compare your actualnumbers, revenue, profit, owner's

(02:00):
pay tax and expenses to profit first.
Target percentages.
Let's walk through it.
Grab your last 12 months financials.
Your accounting software likeXero or QuickBooks can help.
I'm going to use small numbersso it's easy to understand and you
don't get number blindness.
Step one, note your top linerevenue, say £100,000 for a Cardiff

(02:24):
bakery.
Step two, subtract materialcosts like flour for the bakery to
get real revenue, maybe £80,000.
Step three, list your actualprofit owner's pay tax and operating
expenses.
Maybe you kept £2,000 profit2.5%, paid yourself £20,000, set

(02:47):
aside £10,000 for tax andspent £48,000 on expenses.
Now compare to targets for an£80,000 real revenue business.
Profit first suggests 5%profit, 50% owners pay 15% tax and
30% operating expenses.

(03:09):
The gap.
Your bleed shows where to improve.
What if my numbers are awful?
Don't panic.
Mike shares stories ofentrepreneurs in worse spots, like
a business owner with 15million pounds revenue but no furniture.
The instant assessment is yourstarting point, not your destiny.
In the uk, high taxes and VATmake this step critical.

(03:33):
You can't ignore hmrc, but youcan plan better.
Consider James, a freelancer.
His turnover was £90,000 buthis instant assessment showed 0%
profit, 20% ors pay 10% taxand 70% operating expenses.
He was shocked.
70% on expenses like softwareand travel was unsustainable.

(03:58):
We set targets 5% profit, 50%owner's pay 15% tax, 30% operating
expenses.
James cut his co working spaceand unused subscriptions, saving
10,000 pounds annually.
Six months later he had 4,500pounds in profit and paid his VAT

(04:19):
before the deadline.
Your Action step Complete theInstant Assessment.
Download the form fromfinancially healthy business.co.uk
it takes 20 minutes butchanges everything.
Next episode we'll explorechapter four choosing your own profit
first adventure.
Subscribe now for the nextepisode to make Profit first work

(04:40):
for you.
Thanks for tuning in to Profitfirst with Me, Deb Halladay.
If you found today's episodehelpful, please subscribe, leave
a review and share it withanother business owner who needs
to hear this.
For more resources, coursesand to connect with me, head to debhalladay.co.uk

(05:02):
and remember, when you putprofit first, you build a business
that reduces the stress whileit supports your goals and dreams.
See you next time.
SA.