There is contractor by the name of Jim Brown in Mountain Home, Ark., who drew my attention to something he calls “The Law of Money.” The Law of Money says that any budget, be it personal or business, will absorb every dollar placed in it. Put another way, no matter how much money you have in your checkbook it always seems to get spent.    
    The Law of Money might not be 100 percent accurate but it serves to illustrate an important point. If you don’t plan how you’re going to spend your money, your money will make its own plans and probably wander off without consulting you.     
    Jim Brown illustrated his mastery over the Law of Money when he started selling maintenance agreements a decade ago. Since he already had a profitable business, his entire fixed overhead was already covered. That meant at the time he could sell maintenance agreements for $100 and still make a $50 net profit on them. Jim understood the Law of Money—he knew if he deposited the $100 and left it in his general account the Law of Money would take over and the additional money would simply disappear. When he met with his accountant at the end of the year he could show $20,000 in new maintenance agreement sales but there wouldn’t be any additional money in the checkbook. With that scenario in mind Jim made a life-changing decision. He decided to take control of his newfound profit.    
    Before he deposited his first $100 check from his new maintenance agreement program he had a little talk with his office manager. His instructions were quite simple. Whenever the company received a $100 check for a maintenance agreement the office manager was instructed to deposit the $100 into the general account that day. However, the same day the office manager was also instructed to write a check for $50—the profit portion of the maintenance agreement sale—and to deposit that into a savings account. If three checks came in during the day then the office manager was to deposit $150 into the savings account. The office manager was also instructed that when the total saving account reached a pre-specified level she was to take 30 minutes off and go to the bank and purchase a 12-month certificate of deposit.    
    The newfound profit wasn’t needed in the past and it wouldn’t be counted on in the future, either. As the years have gone by Jim says his favorite pastime is to sit in his favorite rocking chair on the front porch and thumb through those CD’s.   
    With that in mind I want you to do something for yourself. There isn’t a person reading this article who would miss $100 out of their general account each week, even if you’re a one-man operation. Somehow your company would make it through the month without it. Now assume you took the $100 a week and deposited it into a mutual fund, which traditionally earns about 12 percent a year over the life of the fund. Based on the time value of money (money earning an average interest of 12 percent a year) your $100 a week deposits would yield the following results.   
    Would an extra $25,000 or $50,000 be helpful when it comes to retirement and/or sending your children to college? I bet the answer is yes. I can’t tell you how many contractors have come up to me during conventions to tell me “thank you” for this suggestion. It has changed their lives and it’ll change yours as well.   
    Do yourself a favor. Take a few dollars out of the company checking account each week, set it aside and watch it grow. The key is to have the person handling the checkbook deposit the money. If it’s up to the owner the $100 a week will either be rationalized away or things will simply get busy and you will forget to do it.   
    For more suggestions on how to run a profitable business you might want to consider attending our three-day “Basic Business Boot Camp.” We will be holding another boot camp in the San Francisco area May 13-15. Give us a call for details or check it out on our Web site at www.GrandyAssociates.com.