What is a financially sustainable business? Why you're getting it wrong

What is a financially sustainable business?

I did a Google search, and here's the first result that popped up: “A business that accrues healthy levels of revenue, sees consistent return on investment, and is able to achieve a profit after expenses is typically defined as a financially sustainable company.” - Moneff.com

Looks pretty reasonable, right? 

But we've got a few issues with this. Let's take a closer look. 

"healthy levels of revenue"

Revenue is important, but it's not the be-all and end-all. It's easy to get caught up in the numbers game, focused only on the total sales you're making.

The problem, though, is that it's not about how much money is coming in; it's about how much of that money stays with you – that's your profit.

Hang around with us for a while, and you'll hear us say over and over:

Revenue is vanity, profit is sanity. 

Profit isn't just what's left after all the bills are paid; it's the measure of a business's true health.

This is where many people get it wrong. They treat profit like it's the cherry on top, but really, it should be one of the main ingredients. If your business isn't profitable, and you're working for nothing? You don't have a business, you have an expensive, time consuming hobby.

And let's talk about paying yourself. It’s amazes me how often this is overlooked in the discussion about financial sustainability in small business. If you, as the business owner, aren't drawing a reasonable wage for your blood, sweat, and tears, how can the business be sustainable? Paying yourself is not a luxury; it's a necessity.

"profit after expenses" 

This is the generally accepted accounting formula: 

Sales – Expense = Profit 

It’s a great formula for accountants. It’s logical, simple and clear.  

But it’s not such a great formula for business owners.  

Profit First flips this formula to:  

Sales – Profit = Expenses 

Which means that we still get those sales in, but instead of spending anything we can to get the sale, we focus on making every sale profitable. We spend efficiently, and without waste, to support those profitable sales. Because Profit First is all about putting your profits first.  

No more “get the sale at all costs”. You want a business that’s going to support you and your lifestyle, one that you can grow to the size that you want, without the financial stress that’s seen as normal when you’re a business owner.  

Here's the definition we should be working with:

“A financially sustainable business is one that is consistently profitable, pays its owners a reasonable level of pay for the work that they do, and pays them a profit to take as a reward for their investment.”

So those healthy levels of revenue need to be making you a healthy level of profit because that's how you get rewarded for the risks you take running a business. That's your return on investment right there. And you need to get paid a reasonable salary on top of the profits that you take.

How do you do that?

Work with us.

You can get started with our free course: Preparing for Profit First.

Or you can jump straight into our DIY course - The Profit Rocket: Profit First Foundations.

Want to work directly with us? We've got you covered in our signature course: Permanently Profitable. Work through this one at your own pace, with weekly coaching calls to keep you on track and accountable. 

Or you can work one on one with our Profit First Professional and Chartered Accountant, Ian. You'll get Profit First implemented in your business, completely customised for you, in just four weeks. 

No matter which option you choose, you'll learn to pay yourself first by taking profit and a wage, and you'll learn how to reverse engineer your business so that you can do that consistently. 

You'll understand the importance of reducing waste, spending efficiently, and charging the right prices so you can increase your profitability and grow your business. It's about making smart choices, not hard ones.

Patience and persistence are key. Building a financially sustainable business isn't a sprint; it's a marathon. There are learning curves ahead, but the reward is a business that not only survives but thrives – a business that supports you, your lifestyle, and your future.