Page 84 - The UnCaptive Agent

PREREQUISITES FOR SUCCESS 57

please consider carefully how you will use it. An important
principle of business success is to pay the business first.
By this, I mean you that in your operations, you should
always plan to make a profit. You should always plan to
retain some of those profits. You will need them to grow
the business. They will be necessary to hire employees,
buy equipment, and help manage the increasingly complex
cash flow issues as you grow.
I recently had a conversation with one of the agents in
our organization who wanted to buy an office building.
When we looked at his balance sheet, we discovered that
there was no cash. Even though he had been in operation
for a few years, he was literally consuming, personally,
all of the money that the business made. He was in a
situation where he really couldn’t afford to upgrade
his furniture, computer systems, or even employees,
much less have the money for a down payment on an
office building. That would not have happened had he
followed the principle of paying the business first. So,
my suggestion is to decide what the profit margin of
your business will be. Then, make sure that it makes
at least that much profit before you take any personal
income from it.
How much profit should your business make?
According to the Growth and Performance Standards
benchmarking survey published by the National Alliance
Research Academy, agencies with under $500,000 in
revenue average 10.25 percent pretax profit. However,
it is my experience that the most successful agencies
target twenty-five percent or more for pretax profit.
They do this because it raises the value of the agency
(discussed later in this book) and provides greater finan-
cial flexibility for the business and its owners. I would
recommend that you make sure your business make at
least ten percent before you pay the owner(s), a salary,