There was a lot technical material in this chapter I think. It was called “Live And Die By The Plan.†The main formula that Cloutier was emphasizing was how you should always have a “profits first†plan. I’ll try to briefly explain it. From what I gather, he emphasizes how when it comes to planning and budgeting most people revolve this around items such as anticipated sales and the cost of obtaining items.
An example would be you want to open up a store and so you look at the cost of the building. Then, you look at the products you are selling to see how much you need to sell to make that monthly rent as well as making an income for yourself. Basically, your plan is not revolved around your profits but rather things like potential sales.
Therefore, the better way to do it is to base it on your profits. An example was that for every dollar that you sell 15 cents goes to you and 85 cents goes to the business. So with that you are basing your expenses on your pool of profits and not in anticipation of future sales. If you can’t afford something yet then you don’t get it as you need to cut back.
There was a good analogy for this such as a family trying to save money. Basically, if you tell yourself that you have to save say $1000 every month you would automatically take that out of your monthly income funds first. Then, you have to base your budget around what’s left. Normally the bad way to save would be to spend first and then save how much you have left. It makes sense in many ways as revolving around a plan with this method forces you to be really on top of your financial situation.
The other part of the advice when it comes to making a plan was ways to hold employees accountable. He suggested things such as financial incentives for people that do well such as meeting a sales quota. Other than that, lot’s of story examples based on his past experiences in working with business owners.
What this chapter kind of shows too is that being financially successful in your personal life and in a business takes almost the same type of strategy and direction. Similarly, the same type of bad habits tend to produce the same type of bad results.