Let’s be honest: nobody starts an eCommerce business because they’re trying to become a capitalist tycoon. (At least not overnight.)
Yes, an online business can be amazingly profitable if you run it right and focus on steady, sustainable growth. But as an eCommerce business owner, money is just one of the priorities on your list…and probably not even the top one!
Owning an online business is just as much about personal freedom and fulfillment as it is about paying the bills.
As an eCommerce business owner, your goals include having more time to spend doing what you love with the people you love, being able to work from anywhere, and having control over your financial future.
And no matter whether your eCommerce business is a full-time gig or a side hustle that supplements the income from another job, there’s something incredibly satisfying about seeing your hard work grow, flourish, and yield profits.
What Is PREP?
The PREP Phase comes as the third stage in The Profit Path™ because and after The Systems and The Facts stage, PREP the most important element as you build your financial plans for profitability. The PREP Phase not only lays the planning foundation for your eCommerce business expenditures but also sets the standard for the personal financial goals you’re trying to attain.
Here’s a little-known fact: while “Prep” is shorthand for the word “preparation,” it’s also an acronym for a tenet of The Profit Path™ that goes even deeper. That acronym goes like this:
What does it mean, you ask? Simply put, it means not being afraid to say what you really want out of your business.
How Does It Work?
When you engage in The Profit Path™, the first thing you’ll do is sit down with a Profit First professional who will coach you in opening up your thought process to set goals. What they’re helping you develop is the potential for your business’ Good-Better-Best.
The Good-Better-Best process is the first phase of your Profit Planning. This is the process where you really dig into your personal finances and do some “soul-searching” to figure out where you need and want your business to go so that it serves you too.
The “Good” is basically your personal/household budget as “bare bones” as it gets.
The “Better” is your current expenses plus a lot more play, fun, and saving built-in. Think of this as where you want to be in 2 to 5 years.
The “Best” is your DREAM life where your expenses could be significantly more than they currently stand (even up to 20x)! While it seems a bit “meta”, this analysis is CRUCIAL because it helps you figure out how much you need to make each year between PROFIT + OWNER’S PAY to take your life where you want it to go.
It may surprise you to learn that most eCommerce business owners struggle with this step.
They feel like they need to set the Best option as something they can easily attain, in order to feel like they have accomplished their goals. But nothing could be further from the truth.
The easily attained goals should be listed under your “Good” column. The “Better” column is for a what you can imagine if you really pushed.
And the “Best” option? That column should really stretch your imagination. Think new Ferraris, taking three months off every year to travel, sending all your nieces and nephews to college, etc.
It may seem daunting to dream this big. But if you can’t dream it, how will you achieve it?
So Where Does Prep Phase Fit Into The Profit Path™?
The PREP phase influences all the phases that come after it. After the PREP, you have three annual Owner’s Pay amounts to strive for (your Good-Better-Best). From there, you will take your Profit First percentages and figure out what you need to be earning for Gross Revenue and Real Revenue.
The next phase, PLAN, is coming up with a plan to hit those Good-Better-Best revenue numbers. This typically consists of evaluating your current product/service mix and figuring out which products are the most profitable. Often, it means consolidating your current product line to drive focus to the “moneymakers”.
After you come up with the PLAN, you must next implement it, which leads us to the PROFIT phase. During this phase, we take your Profit First percentages that were assessed during the PLAN stage and come up with a system to work towards them slowly based on where you currently stand. Each quarter, you will get closer and closer to the target allocation percentages.
This phase often involves looking closely at Operating Expenses and deciding which ones can be cut or where money can be more efficiently spent. It’s a continuous cycle to keep the Prep, Plan, Profit moving along in your business. It’s never a once and done thing.
More Than Money (But Also Money)
Besides more money in your pocket, other benefits of following The Profit Path™ include having a systemized way to ensure that you are saving for taxes, paying down debt, and saving for more “play” in your life.
Another huge benefit is having a community of people who are on the same journey. We do this through our ProfitHERO™ online mentorship program. You don’t have to journey alone this way!
Lastly, having twice-per-month money meetings will get you more in touch with your business’ finances and taking a “hands-on” approach to making things more efficient and lean.
Your Partner in the Profit First Process
Excited about the potential of implementing Profit First in your business? Great! Our Profit First Kickstart and Prep-Plan-Profit Intensive sessions are fantastic ways to get started. These are great Done-With-You solutions.
If you’re like a lot of eCommerce business owners, you’ve read the Profit First book but you don’t know where to start. The Profit First Kickstart is perfect for those business owners wanting a “crash course.” You’ll leave the 90-minute session ready to start making profit distributions and having a clear idea of what will need to be set up in terms of bank accounts and internal processes.
Expect the Unexpected (In a Good Way)
Don’t be surprised if, along the way, you find that your see goals are shifting or changing. This is totally normal…and good! Once eCommerce business owners get into the PREP phase, many of them realize that their goals are not only financial but also lifestyle goals. A Profit First discussion often shifts to the discussion of “How can you have more TIME for work-life balance?” These discussions have led to us working closely with eCommerce business owners to bring on full-time team members to take duties off of their plate, while not jeopardizing their pay and profit.
The Bottom Line
There are as many different definitions of success for an eCommerce business as there are eCommerce business owners. For your business to yield the rewards that led you to start it in the first place, it’s vital to sit down and really identify what feels like success to you and build the foundation that will help you get there. But, you don’t have to do it on your own. Do consider a partnership with us and we’ll walk through every step of the process with you.