Successful businesses consistently show a profit over time.
Successful people do the same thing.
At this time of year, businesses around the world (mine included) perform an important activity. They take considerable time and pay particular attention to go over all the previous year’s income and expenses to determine whether that business had a successful year. According to the findings, there can be cause for celebration, change or fear.
To expedite this process, businesses generate what is called a Profit and Loss Statement. To simply describe a “P&L,” a business itemizes and reports on everything it has accomplished over a specific time period to reflect either income or expenses. So in terms of money, essentially a business looks at what came in and what went out. Then, once you have all those numbers, there is only one last, and most important calculation to make: you subtract the expenses from earnings to see it there is a profit.
Even though you might not hear it in a business class, one of the main reasons to have a business is to create profit. Turning a profit is critical to either continue or grow a business. If a business cannot consistently earn a profit, the business will not stay in business for long.
Profit is not just a primary goal of a business. Turning a profit should the primary goal for your life.
Although I may have simplified some things (when you run a business there are deeper ways to analyze your P&L statement like margins, gross, EBITDA, etc), there is one thing that can’t be over-simplified: Profit really is the “bottom line.” If you are showing a certain amount of projected or expected profit over time, your business is considered a success. If your business is showing an unexpected loss over time, your business is considered a loser. The same thing is true for your life.
Profit from your endeavors for long enough over time and you will succeed. Lose from your actions for long enough over time and you will fail.
Whether you are involved in business or not doesn’t matter. I am hoping that the analogy of analyzing your life like a business makes sense. To lead a successful business, you should constantly be looking at every aspect of your business to evaluate if it is producing a profit. By applying this same idea to my life, I have learned this is a great philosophy to insure ongoing success in a world of ever-growing distraction. And all you have to do is ask yourself one big question before you do anything:
“Is what I am about to do going to lead to a profit or loss?”
When you think about personal profit, you have to assess your potential gain versus the cost. To do this with every interaction or activity of your life is not as hard as you think. You just need a system to evaluate how you are using your resources and whether those applications are producing a gain in terms of areas of value. The purpose of this email was not asking you to go into business or learn how to run or account for one. My idea was to challenge you to learn to run and account for the activities of your life like a business by creating a personal P&L.
Before I give you my 5-Step Process how to account for just about every aspect of your life and how they are either helping or costing you, I want to make sure you understand the “bottom line” of the whole process. In business, your net profit, net income or net earnings is the bottom line. Profit in business is money. In life, however, there is more to concern yourself with than just money. In addition to net worth, your net health, net relationships, and net personal growth are also your bottom line. Once you perform your personal P&L, these will determine whether your life is profiting or losing.
P&L statements are very enlightening. In fact, most businesses are required by law to create them. Funny, but maybe every person should be required by law to do this too.
5-Step Process To Build Your Personal P&L
STEP 1: KNOW YOUR AVAILABLE RESOURCES
Really “accounting” for you life involves where you are spending/wasting/profiting from your resources. The three main (and most valuable) resources you possess are you time, money and energy. In order to account, you need to know what you have available to spend.
ACTION ITEM: Write down how much money, time and energy (physical and mental) you have available. You can do this daily, monthly, etc.
STEP 2: ITEMIZE YOUR LIFE
In order to eventually see if your resources are delivering a profit or costing you, you need to break down the areas of your life into the main categories in which your resources are spent. To help you with this process (and in honor of my book, The Book Of 5 Things), here are the five main categories in which you should be wisely using your three resources above:
ACTION ITEM: On your P&L sheet, list each of the 5 categories above in order with a space left between each category.
STEP 3: BREAK OUT THE CATEGORIES
Once you know your resources and understand the different categories of your life, it is time to add what are called “individual line items.” So, under each of the categories, you list all the ways that you expend any of your three resources. In order to help, I have listed three sample line items that should probably be on your P&L:
ACTION ITEM: Under each category, write down the line items listed above or any others you can think of in which you use your resources.
STEP 4: ANALYZE THE PROFIT OR LOSS OF EACH LINE ITEM
With your P&L now itemized and listed out with line items, it’s time to assess if each line item is producing a profit or creating a loss. In order to do this, you can simply ask yourself the following questions about each item:
What am I gaining from this activity?
What am I losing from this activity?
Is this helping me become more valuable?
Is this hurting my health, relationships or future development?
Will this produce a reliable profit on my money or time?
ACTION ITEM: Start using these questions to discover whether you are getting a profit or loss on my resources. Mark your answers next to the individual line items.
STEP 5: MAKE THE APPROPRIATE CHANGES
Your personal P&L statement will give you the opportunity to review your net profits, which is essential for making sound decisions for the future. With all the answers in front of you, you should look at what you can change in order to make some better profitable personal decisions with your life.
ACTION ITEM: Write down a list of changes you are prepared to make on certain line items in order to turn past losses into future profit.
Want one place to be sure to turn a profit? One way to surely improve is to join me in New Jersey on March 2nd for my live, full-day mentorship Coaching Greatness. Over 4,000 people have improved their lives at the event. This is my last trip to NJ and spots are limited so get yours here:
I challenge you to at least work through the 5 steps above and look back on the last year. This process should not only enlighten you about your past, but also more importantly give you a profit-seeking mindset for the future. Over time, it is my hope that you learn to assess the “profitability” of your activities before you perform them.
Just like in business, performing a P&L isn’t a one-time thing. Businesses constantly review and you should too, until you are constantly aware of the possible profit or loss of every action. Once you develop this mindset, you will be on the hunt for a little profit every day.
Follow the steps above and I promise eventually the rewards of your life will be “in the black.”
Yours in Strength,
P.S. Want two more great ways to turn a profit with your time?
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