What can toothpaste tell us about running a business?

You know how, when your toothpaste tube is new and full, you don’t pay much attention to  how much you put on your brush?  You just grab it and give it a good squeeze.   And, why not… There’s plenty in the tube right?  But when it’s almost empty, now that’s a different story. Even if you have a brand new tube within arms reach!  

You do whatever you have to do to get every last molecule of that stuff out, don’t you?  You may even put it on the counter so you can push down on it with both hands. I’ve seen people use the bathroom door to squeeze some of that mint flavored sugar infused  paste onto a toothbrush.

So, what can that tell me about running my business you may ask… A lot.

When the tube is full, you’re not thinking about how inefficient you’re being and you’re definitely not thinking about what it’s going to cost to buy a new one. But when it’s almost empty, you suddenly become the Ebeneezer Scrooge of personal hygiene. Why is that?


Because, while we should strive to be efficient with all of our resources at all times, human nature doesn’t work like that. But introduce lack into a scenario and suddenly we become expert Lean, Six Sigma Kaizen practitioners like we have a Ph. D. in business from MIT.
 
Ok, so how do we apply this to running a business?
 
I suggest starting with your daily operating (checking) account. Most small business owners put everything that comes in… into that account. Then they (or their bookkeeping team) pay bills, make payroll and purchase the necessary supplies or materials needed to run the business.

So what’s wrong with that you may ask…
 
The problem is, when the account balance is flush, we all tend to take our eye off the ball (financially speaking) just a little. Like we do when we have a full tube of toothpaste.  That breeds inefficiency and sloppiness with your most important resource… your cash!

What we suggest is, estimate how much of every dollar that comes into your business will be profit after all the bills and payroll (including yours) are paid. It may be 10% or 20% or it may be 1% in your case. That’s fine but whatever you think it is, every Monday morning, total up every dollar that came in the week before, pull your estimated profit % out and put it into a different account.

Actually, you should put it into 2 different accounts. One account for taxes and one account for profit/savings. Put 1/3 of the amount into the tax account and 2/3 into your profit/savings account. (Don’t worry about running out of money in your operating account… you can always pull some back in if necessary).


If you do that, you will be creating a culture across your entire organization that says "we pay attention to efficiency and financial stewardship at all times around here".


So next time someone in your organization thinks, “oh, I’ll order a little extra _______ for this project so we don’t have to worry about running out", whether that ______ is $10,000 of construction materials or a case of paper clips from Office Depot, they’ll think twice. (And if they don't... there won’t be "fluff"  sitting in your checking account for them to overspend anyway).
 
Additionally, won’t it be nice to tell you CPA next March that you already have the money you need set aside in your tax account for Uncle Sam?

​And oh yeah, that conversation will happen after you used the majority of the money in your profit/savings account (the money you didn’t let leak out of you business on inefficient spending) for adding to your retirement plan… and a nice vacation with your family!