You've heard about Profit First. Maybe you've read Mike Michalowicz's book, or perhaps a fellow business owner raved about how it transformed their finances. Or maybe you’ve read our other articles on the subject.
The concept makes sense: Take your profit first instead of hoping there's something left over at the end.
But now you're staring at this revolutionary system thinking, "Okay, this sounds great in theory, but how do I actually make it work in my business?"
It’s normal to feel overwhelmed at the thought of implementing Profit First. It’s a radical departure from traditional accounting, and it can seem daunting to completely change how you handle your business finances.
That’s why I have four simple, practical tips for implementing Profit First in your small business. These are proven strategies that eliminate the guesswork and help you start seeing results immediately.
Tip #1: Use Your Existing Bank Account as Your Revenue Account
Business owners sometimes think they need to completely overhaul their entire banking setup before they can start. And that just isn’t the case.
Use your existing business checking account as your "Revenue Account." That's one less account to open, one less thing to set up, and one less excuse to delay getting started.
Here's how it works:
- All your income continues flowing into your current account.
- Every week, you'll allocate money from this account to your other Profit First accounts
- Your existing account becomes the hub that distributes money to your other accounts: profit, taxes, owner's pay, and expenses.
Why this works so well: You don't have to change how your customers pay you, update any automatic deposits, or notify vendors about new account numbers. You're building on what already works instead of starting from scratch.
Pro Tip: Keep using your existing business debit card and checks for the first month while you adjust to the new system. Once you're comfortable with allocations, you can fine-tune your banking structure.
Tip #2: Open Additional Accounts at Your Current Bank
You may be tempted to shop around for the "perfect" bank accounts with the highest interest rates and lowest fees before you even start.
But this perfectionism will kill momentum and delay implementation.
Our recommendation: Open your "Owner's Pay" and "Operating Expenses" checking accounts with your current bank. If there are fees or minimum balance requirements that don't work for your situation, then shop around. But don't let this stop you from getting started.
The four additional accounts you need:
- Profit Account (savings; consider a different bank to reduce temptation)
- Owner's Pay Account (checking; same bank for convenience)
- Tax Account (savings; different bank recommended)
- Operating Expenses Account (checking; same bank for easy management)
Why start with your current bank? You already have a relationship, you know their systems, and you can often open accounts quickly online or with a simple phone call. Perfect is the enemy of good, and getting started is more important than worrying about every detail at first.
When to shop around: After you've successfully run Profit First for 90 days and want to optimize interest rates on your profit and tax accounts.
Tip #3: Start With Suggested Target Allocation Percentages (but Be Flexible)
Profit First provides Target Allocation Percentages (TAPs) for different types of businesses. These act as your north star, but you don't have to hit them perfectly on day one.
For example, service-based businesses typically have different allocation needs than product-based businesses or restaurants. Rather than using one-size-fits-all percentages, Profit First recognizes that every business is unique.
If the recommended percentages seem impossible or too high based on your current reality, lower them and work your way up gradually.
How to start if the suggested TAPs feel too aggressive:
- Begin with just 1-3% for profit allocation
- Set owner's pay at your current draw amount
- Allocate 10-15% for taxes
- Use whatever's left for operating expenses
Pro Tip: Every quarter, consider increasing your profit allocation in small increments until you reach your target. This will prevent shock to your cash flow while building the profit habit.
The important thing here is that you’re doing something, but don't let yourself stay at minimal percentages forever. Set a goal of reaching your full TAPs within 12-18 months.
A certified Profit First Professional can help you determine the best starting percentages for your specific business situation. (Patrick Accounting happens to be a Profit First firm that specializes in exactly this type of guidance!)
Tip #4: Reward Yourself When You Make Your First Quarterly Distribution
The psychological power of Profit First is in the emotional experience of taking profit distributions. Your first distribution is a milestone worth celebrating, even if the amount seems small.
How to handle your first distribution:
- 99% for business growth/debt elimination. At first, you may have a goal of paying off business debt, so most of your initial profit distribution should go toward that. This creates a positive cycle, and your business becomes more profitable and less burdened by debt.
- 1% for personal celebration. Because you've worked hard to implement this system, set aside a small amount to give yourself a pat on the back. Even if your total distribution is only $500, take $5-25 for something special.
Why does celebration matter? We’re not talking about frivolous spending. This is psychological reinforcement. When you connect Profit First implementation with positive experiences, you're more likely to stick with the system long-term.
Plus, having something to look forward to 90 days from now gives you a concrete reason to stick with the weekly allocation routine, even when it feels constraining.
Real Business Owners Share Their Results
"This sounds great and all, but does it really work?" We understand your skepticism. Instead of just taking our word for it, here are experiences from real business owners who've implemented these exact strategies:
Lisa Van Gemert (The Gifted Guru, Arlington, TX) is an author and speaker who specializes in helping educators, school administrators, and parents teach gifted children. She makes 70% of her income in just two months each year.
In her words: "Implementing Profit First took me 30 minutes to set up and has given me a huge sense of peace. The biggest difference really isn't even in the numbers. The biggest difference for me is in the weight off my mind. I KNOW what will happen. I don’t have to think about everything all of the time."
Josh Steimle (founder, WMI International Marketing Agency) is a business coach who made “Profit First” required reading for his management team, and it’s changed how they run their business.
In his words: "The benefits have been immediate and large. I fully expect that 10 years from now we'll look back and say, 'It wouldn't have happened if we hadn't read THAT book.'"
Wendy Keller (founder, Keller Media) runs an agency that helps authors get published. She admits implementation was challenging but transformative.
In her words: "It taught me to see my TIME as an allocation of percentages too, and it's led to me calculating averages on my personal expenditures. I'm seeing huge black holes into which I gleefully pitch my money. Putting this book into practice has been fascinating. I 100% recommend it for every small business owner."
The Truth About Profit First Implementation Challenges
Just because the Profit First system is simple doesn't mean implementing it will be easy.
Change is always challenging to some degree. That's no reflection on the value of what you're changing to. In fact, the more challenging a change is, the more valuable it often proves to be.
But I guarantee it’s totally worth the effort.
If your finances are stressful right now, the system you're currently using is perfectly calibrated to give you exactly the results you're getting. Profit First forces you to operate differently, which can feel uncomfortable at first.
Most business owners need an adaptation period of 30-90 days to fully adjust to operating within allocated expense budgets. This constraint forces creativity and efficiency that ultimately makes your business stronger.
Why You Should Get Professional Support for Implementation
As you can see, there are lots of ways to get started implementing Profit First. The beauty of this system is that it gives you rails to run on, but it doesn't make all the decisions for you. It's extremely adaptable, and any kind of business can benefit immediately.
Implementation success improves dramatically with professional guidance. A certified Profit First Professional helps you:
- Determine the right starting percentages for your industry
- Navigate challenges during your first 90 days
- Integrate Profit First with your existing tax and accounting systems
- Optimize your approach as your business grows
At Patrick Accounting, we've seen how this system transforms businesses across industries, from restaurants improving their notoriously thin margins to professional service firms building substantial cash reserves.
If the cost of NOT taking control of your finances feels higher than the challenges of switching to Profit First, you're ready for this change.
BTW, if you switch and hate it (which is unlikely), you can always go right back to the old way.
When you're ready to learn more or partner with a Profit First Professional who can help set you up for success, give us a call to set up a consultation today.
Because the best time to take your profit first was yesterday. The second-best time is today.
Check out some of our other Profit First articles to learn more:
