Finding a bank that supports Profit First.
Profit First is a simple system, but the process of finding a bank that supports it can be painful. Almost 100,000 companies have implemented Profit First within the first year of the release of the Profit First Revised & Expanded Edition and the most common question I get is,
“What bank should I use for Profit First?”
Here is the simple answer:
You want to work with a bank that does not charge minimum balance fees on checking or savings accounts. Which leads to “How do I find the bank?”
CONSIDER YOUR EXISTING BANK
If you are thrilled with your existing bank, tell them you would like to set up additional checking and savings accounts. But, before setting up the accounts ask them if there are any minimum balance fees for the new (or existing) accounts.
If your existing bank does not have a minimum balance fee:
Congratulations, you already have a bank that is likely a good fit for Profit First. Still, explain that you are looking to save more money at the bank (you know, like profit) and to do this it will be necessary for you to transfer money from account to account often bringing zero-dollar balances to certain accounts. It helps for your bank rep to know the system.
Set up your foundational five accounts (Income, Profit, Owner Comp, Tax, OpEx) and start using the Profit First system.
If your existing bank does have a minimum balance fee: Explain that you are looking to save more money at the bank (you know, like profit) and to do this it will be necessary for you to transfer money from account to account often bringing zero-dollar balances to certain accounts. Then ask if they are willing to waive their fees. If they are not willing to waive their fees, that (in my opinion) is a strong indicator of how interested they are in your business and in supporting you. And it is a strong indicator that you need to find a new bank.
FINDING A NEW BANK (OR CREDIT UNION)
Community banks and credit unions are the best for Profit First. Why? Because they don’t charge minimum balance fees, they offer (in many cases) more advanced technology than large institutions, are often the most secure banking platforms, and they are often better designed to support small business.
In fact, I personally work with a local federal credit union and have twelve accounts set up there for my business. No fees, no problems. Albeit, I get an occasional (fun-loving) eye roll from Lorraine when I go to the bank to set up another account, they get what I am doing and I have become one of their biggest customers.
Here is a great tool to find a community bank near you: ICBA Bank Locator
Here is a great tool to find a credit union near you: NCUA Credit Union Locator
TRANSFERRING TO A NEW BANK
I know it can seem daunting, but don’t get overwhelmed by the prospect of moving to a new bank. It is an easy and painless process if you do it in small steps. Here’s how:
1. Once you locate a new credit union or community bank that doesn’t charge minimum balance fees and allows unlimited (or at least 10) checking/savings accounts, set up the initial accounts.
2. Minimally, request three checking accounts for Income, Owners Comp and OpEx. You can add additional accounts later for advanced Profit First techniques, but this will get you started.
3. Minimally, request two savings accounts for Profit and Tax.
4. With the accounts setup up, you are ready for the transfer from your old stodgy bank to your new Profit First bank.
5. Don’t close the accounts at the old bank just yet.
6. Start the transfer by putting new check deposits into the Income account at your new Profit First bank.
7. Then set up the transfers for any other types of deposits to your Income account at the new bank. This may include credit card receipts, wire or ACH transfers, or transfer from payment processors like PayPal.
8. With the money now flowing into your new bank/credit union, you will naturally start to pay bills from that bank and follow the Profit First process.
9. As your bank accounts dwindle at your old fee charging bank, be sure to stop all vendor payments and all deposits from going to that bank. Once the cash flow at the old bank is stopped, shut down the accounts, and transfer all the remaining money from that bank to your new Profit First bank.
I can’t emphasize enough, how important it is to have a bank that supports Profit First. I realize this may take a few hours of your time over a few days to get initially set up, but don’t let that dissuade you. I mean, you want to be profitable right?
DON’T LET THEM LIE TO YOU
Don’t let a banker tell you that Profit First won’t work for you.
It is funny, but some bankers hear about the Profit First method and then say things like “That is too complicated.” or “That won’t work.” But that is an argument from ignorance. The truth is they have never done it and they don’t know any clients who are doing it, so they just assume it won’t work. And they assume it won’t work because it is in their best interest to tell you that.
You see, if you don’t try Profit First, then they don’t need to change how they serve you as a bank. It is easier for them to force you to do it the way that works for them.
Resist the temptation to listen to a banker or anyone who has no experience with Profit First. They may mean well, but they don’t have practical experience and will give “advice” that is in their best interest. Remember, Profit First is about you. We are about to make you permanently profitable, with the right bank!
A STORY FROM A READER
Here is an email I received from a reader named Colby Street. Colby’s experience with her bank, sadly, is not too uncommon. Her response and action are perfect. Profit is clearly in Colby’s future:
“Funny story! Just called my personal bank to open the additional accounts I need to implement Profit First for my personal finances. The guy asks why I needed so many accounts and was more than happy to help me set up the new accounts after I briefly explained Profit First.
After he explained all the bells and whistles he was told that there would be a fee for each account and I asked how I can get those waived. He went on in detail all the different events that had to happen (all of which are against everything PF stands for) I told him that those are not going to ever be met with this system I am starting and that if the fees cannot be waived I would be switching banks.
His response was to challenge the Profit First System as cumbersome and complicated! That was his sales pitch! To call the reason I was interested in doing more business with them STUPID and that it wouldn’t work!
I have been in sales for over 10 years and have made some bonehead attempts to save a sales going south but have never had the courage (if you want to call it that) to insult the thought process of a decision maker!
You were right. People won’t get it!”
TAKE ACTION NOW
As with anything, you will only see results if you take immediate action. Right now, find that credit union or community bank and start the process. Wishing you a very profitable year ahead. ~ Mike Michalowicz