5 Reasons You Should Implement Profit First for Your Business

Imagine you’re at a barbecue, and your friend starts giving you advice about your business finances. "You need to pay yourself first," they say. "Set aside profit before you pay expenses."

You nod politely and think, “Sure…once business picks up."

Most business owners have heard of the Profit First methodology, but they brush it off as something to try “someday,” once things settle down. Or they may think, “That's nice in theory, but my business is different." 

But if you're still operating on the traditional "make money, pay bills, hope there's something left over" approach, you're not alone. You’re just stuck in a system that wasn’t built for business owners like you.

At Patrick Accounting, we’ve helped hundreds of clients implement the Profit First system. In this article, we’ll explain why Profit First is a simple, proven system that helps small business owners take control of their cash flow and finally build lasting profit.

What Is Profit First?

Traditional accounting formula: Sales - Expenses = Profit

Profit First formula: Sales - Profit = Expenses

See the difference?

With Profit First, you pay yourself first, then figure out how to run your business with what's left. Every dollar gets immediately allocated into the following predetermined accounts: Income, Profit, Owner's Pay, Tax, and Operating Expenses.

It's like the envelope system you hear Dave Ramsey talk about, but it’s designed specifically for cash flow management in small businesses.

Now that you understand the basic concept, I want to share five specific reasons why this “formula flip” is a great idea for your business.

Reason #1: It Works. Period.

Sometimes the best reason is the simplest one: Profit First works.

And we've seen it work for hundreds of businesses across every industry imaginable, from restaurants to medical practices, service-based businesses, and beyond.

The Profit First methodology is proven. When you allocate profit first, you create profit. It's that straightforward.

Reason #2: It's Based on How You Already Think About Money

The brilliant part about Profit First is that you don't have to learn complicated new habits because it works with how you already manage money.

You're already good at monitoring your bank balance, right? Before you make a purchase, you check what's available and spend accordingly. Profit First leverages that same behavior.

Most small business owners don’t have time to be learning complicated new systems or processes. We've got actual businesses to run, right? 

Well, Profit First works because it doesn't ask you to change your natural money habits. It just redirects them.

Reason #3: It Naturally Makes You More Efficient With Time and Money

Parkinson's Law says that "work expands to fill the time available for its completion." Business expenses work the same way. They'll expand indefinitely to fill whatever space you give them.

Dave Ramsey says, "You've got to tell your money what to do, or it will leave!" Profit First gives your money clearly defined rules and forces you to make it behave better.

When you implement small business cash flow management through Profit First, something amazing happens: You become incredibly resourceful. With less money available for operating expenses, you find ways to:

• Negotiate better terms with vendors
• Eliminate unnecessary subscriptions and services
• Streamline operations to reduce waste
• Focus on spending that generates revenue

The constraint creates efficiency you never knew was possible.

Reason #4: It's Designed to Be Implemented Over Time

One of the biggest mistakes business owners make is trying to change everything overnight. Profit First is designed to be implemented gradually, so you can adjust to it and go at a pace that's comfortable for you.

You should never do anything with money you don't fully understand! That's where big mistakes happen.

Profit First puts you in the driver's seat of the entire process. You start with small allocation percentages and gradually increase them as your business adapts and grows. This approach ensures you're always in control and never feel overwhelmed by the changes.

Reason #5: The Old Way Just Doesn't Work

Time for a Dr. Phil moment: "How's that working for you?"

If the traditional formula worked, you wouldn't be reading this article. You'd already be paying yourself consistently, setting aside money for taxes, and building wealth through your business.

Unfortunately, the old way doesn't work for 99% of small business owners. Most business owners using this traditional formula:

• Work for free in their own businesses for months at a time
• Get surprised by tax bills every year
• Can't answer the question "Is my business profitable?" with confidence
• Feel like they're working harder but not getting ahead financially

Profit First flips the formula and actually works with human nature instead of against it.

Don’t Be the Business Owner Who Ignores Great Advice

The biggest reason business owners don't implement Profit First? They think they need to wait until they're making "enough" money.

But Profit First works at any revenue level. In fact, it works better when you start early, because it forces you to build efficient systems from the beginning.

At Patrick Accounting, we've helped businesses implement Profit First successfully, and the results speak for themselves. Our clients finally feel in control of their finances, pay themselves consistently, and build real wealth through their businesses.

Are you ready to stop working for free in your own business? Learn why working with a certified Profit First professional can make all the difference: "Why You Shouldn't Attempt Profit First Alone."

Don’t wait for “someday.” Take that great advice before it’s too late. Your future self (and your bank account) will thank you.