Why “General” Profit First Advice Isn’t a Fit for Large Multi-Location Business

If you’re running a multi-location business with more than 10 employees, you’ve probably come across the popular “Profit First” book. While it’s a fantastic framework for many small businesses when they are getting started, applying its general principles to larger, more complex businesses can be challenging.

Profit first is focused on cash flow management only, not a comprehensive financial approach to managing your business. If you are an accrual based business, you don’t always get paid or pay bills when received. When payables and inventory are part of the equation, profit first will be limited in supporting the necessary insights to manage your finances.

Profit should be the focus when running a business and thus we do agree with the profit prioritization. In addition, we want to ensure cash reserves are healthy and the owner is getting compensated well while we allocate a portion of revenue for taxes. This all requires a comprehensive financial plan that accounts for all moving pieces in your business.

Here’s why “one-size-fits-all” advice doesn’t work for all business models:

1. Cash Flow Needs Are More Complex

With multiple locations and a large team of employees, your cash flow needs are far more dynamic than a smaller business. Simple percentage allocations for profit, tax, and operating expenses may not provide the flexibility your business needs to cover overhead, payroll, and growth opportunity investments. Having a 3-6mo operating expenses cash cushion or line of credit will help you weather unexpected events in your business while you sleep well at night knowing you are prepared.

2. Revenue Fluctuations Across Locations

Unlike single-location businesses, your revenue might vary significantly across locations or types of services and products you sell. Allocating funds without taking these variations into account could lead to operational gaps or missed opportunities for reinvestment where it’s needed most. Evaluating location performance and profitability will ensure each location is producing the right results and one is not taking from another.

3. Custom Strategies for Profit Maximization

Rather than relying on the basic “Profit First” percentages, businesses like yours benefit from customized financial strategies. Tailored approaches take into consideration your unique business structure, culture, employee compensation models, and the needs of each location based on industry trends. Knowing which levers to pull to grow, where to invest for opportunity, and how to manage the right cost allocation can ensure higher profits for the business.

4. Larger Teams Require More Detailed Financial Management

Managing the finances for a team of over 40-50 employees is a whole different game. With larger payroll responsibilities and more moving parts, a more sophisticated financial strategy is crucial to ensuring stability, profitability, and long-term growth. We need to proactively plan pay increases, evaluate overall compensation structure through the lens of gross margins, manage performance, and hold accountability.

Employees will demand more and you as an owner need to know what you can afford to do for your employees while not running your business into the ground. Employees care about their overall compensation package which includes benefits, time off, lifestyle allowances. Running scenario planning to ensure you can afford to provide that overall compensation over time is key to understand before rolling out changes.

What You Can Do Instead:

For large businesses, a more tailored approach to profit allocation and financial planning will yield far better results. That’s where expert guidance comes in—we can help you adapt these popular strategies to fit your business specific needs.

If you’re looking for a custom approach to financial management that will drive profit growth across multiple locations, let’s connect!

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