Dr. John Demartini, Founder, Demartini Institute
Human behaviorist Dr John Demartini explains why it’s important to pay yourself first and other methods you can use to maximize your profits
A few years ago I worked with an entrepreneur. Although he was driven, he had been overly altruistic and had not maximized his profits to himself. He realized that he was sacrificing himself for others. Although that is the service part of being an entrepreneur, it won’t make a lasting entrepreneur. If your highest values are not being fulfilled and you are not economically viable or profitable then what you’re doing doesn’t have sustainability. And you will probably burn-out doing it.
It is wise and essential to make sure that you structure your business efficiently enough so that you can maximize your service and your profits. If you don’t have a value on making a profit, you probably won’t make one.
Many entrepreneurs have found that if they don’t take money off the top at first and put a portion of it into savings, their unexpected bills will keep eroding their potential to save in the end. It is wise to pay yourself first. If you pay yourself last, you’ll risk not having money left over to save.
Some entrepreneurs, assume that when they make or have a bit extra, then they will start saving. But it is wiser to save and invest your money upfront instead of waiting for it at the end. It is wiser to initiate a savings and investment habit and you will receive more money to manage. When you manage money wisely, you receive more money to manage. It is wise therefore to truly have a value in maximizing your profits and savings. Without this crucial step your money will not begin to stabilize your primary business and begin working for you.
It is wise to pay things by priority. All of your disbursements including all moneys to you, employees, taxes or anything… are to be paid wisely by priority. Start with paying things that are most important first and least important last. And if you pay things according to priority, money is automatically drawn to where it is managed wisely, and if you manage money wisely, you’ll get more money to manage. You’ll attract more business because you’re more effective and efficient. And you are a crucial priority.
Because if the most important people are paid last you will disincentivize them. Those who produce the most are more crucial than those that produce the least. It is wise to invest your money and energy into those individuals or actions that are most important. It is unwise to rob key people of incentives or pay somebody who is not productive at the expense of somebody who is highly productive. You want to make sure you maximize production and reward efficiency.
It is evident when new CEOs take over a company. Their values begin to infiltrate that company. That company will then change its own profit margins based on where the profits are in the new leader’s value system. There are companies that have huge volume with little margins and others that have low volume and have huge margins.
I know an entrepreneur who sat in his underwear at his computer making two million dollars a month. He was a master of the internet and marketing, looking for highly important items that people were most searching for. He also located on line high quality service or product providers who could fulfill those little niches and he was linking these consumers and providers together and receiving a percentage of each one of those through an affiliate program. He raked in the money. And he had himself and his computer, and that was his cost. That’s a very high profit margin and low cost business.
I also once worked with a manufacturing company that had about a 5% margin and was doing about 300 million, but every year it was highly stressful. If a tiny little dip occurred, it would highly challenge the existence of the company. Both of these two extreme scenarios have something to do with the value system of the CEO who’s running the business.
It is wise to strategize how you can make your business more effective and efficient, and maximize your profits. It is wise to constantly look at how you can restructure your business to make it more efficient. As an entrepreneur you are responsible for constantly restructuring your business to maximize your service and profits or otherwise, if you don’t keep up with efficiencies and expectancies, other businesses will come in and grab your customer niches. The business world is a predator/prey game. There are constant predators out there trying to gain hold of your niche. You can’t be doing what you were doing five years ago. You will be responsible for constantly refining it.
So if you don’t have a value on refinement, you’ll stagnate. And you won’t be able to compete in fulfilling your niches in the world. So you first have to dedicate your life to serving, but you also have to dedicate yourself to refining and maximizing your company’s efficiency and profits. So develop the habit of paying yourself first, prioritizing your actions and efficiently serving ever greater numbers of people.
About the Author
Dr. John Demartini is a human behavior specialist, educator, author and the founder of the Demartini Institute.