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Let me tell you something that used to happen all the time in my business, especially in the early years.
I’d look at my bank account, see a healthy balance, and think, “Great! I can finally pay myself properly this month.” So I’d transfer a nice sum to my personal account. Maybe even splurge a little because I’d earned it, right?
But I’d leave plenty in the business account. I wasn’t being reckless. I’d look at that remaining balance and think, “That should be more than enough to cover everything.”
Fast forward two weeks, and I’d be staring at my screen wondering where all that money went. Invoices I’d forgotten about. Software subscriptions that renewed. That course I’d bought three months ago that was now charging the full amount. That “plenty left over” had somehow vanished.
Sound familiar?
This went on for years. Some months I’d pay myself really well. Other months? Nothing. My personal finances were a mess because I never knew what was coming in. And despite working harder and harder, bringing in more clients, I always felt broke.
Here’s the brutal truth I had to learn: working hard doesn’t equal profit. You can be busy, have clients, and be doing great work, and still end up with nothing in the bank.
Then I discovered Profit First.
What Is Profit First?
Profit First is a cash management system created by Mike Michalowicz. It’s dead simple, which is exactly why it works.
Traditional accounting uses this formula:
Revenue – Expenses = Profit
The problem? By the time you’ve paid everything, there’s usually nothing left for profit. You’re working hard, your business looks busy, but you never have money in the bank.
And that’s the lie we’ve been sold: that if we just work harder, bring in more revenue, hustle more, we’ll finally be profitable. But working hard doesn’t equal profit. More revenue doesn’t automatically mean more profit either. Because expenses have a magical way of expanding to fill whatever money comes in.
I’ve seen this with so many coaches over the years. Six-figure coaches having launches that look impressive on the surface. “I just had a €15,000 launch!” they’d announce. Sounds amazing, right?
But then you look at what it cost them. €8,000 in ads. €3,000 for a launch manager. €2,000 in software and tools. Another €3,000 in design and copywriting. Suddenly that €15,000 launch actually lost them €1,000.
They worked incredibly hard. The launch looked successful. But they made no profit. In fact, they went backwards.
That’s the problem with Revenue – Expenses = Profit. Profit becomes an afterthought, something you hope is left over. And usually, it isn’t.
The Profit First Method flips it:
Revenue – Profit = Expenses
You take your profit first, set aside money for taxes, pay yourself, and then whatever’s left is what you have to run your business.
It sounds counterintuitive. “But what if I don’t have enough to cover my expenses?” you might ask.
That’s exactly the point. When you know you have less to work with, you get creative. You find efficiencies. You stop spending on things that don’t really matter. You figure it out.
How Profit First Actually Works
The Five Core Accounts
- Income Account – This is where all your revenue lands first. Every payment from clients goes here initially. You don’t pay anything directly from this account.
- Profit Account – A percentage of every euro you earn goes straight into profit. Start small, even just 1%, and build from there. This account is for you, the business owner, as a reward for the risk you take running your business.
- Owner’s Pay Account – This is your regular salary. No more feast or famine. You pay yourself consistently, every two weeks or monthly, just like an employee. So instead of paying yourself €100 one month and €1,000 the next (and nothing the month after that), you’d work out an amount you can sustain and pay yourself that same amount every single time. Predictable income for your personal life.
- Tax Account – Put money aside for tax every single time revenue comes in. No more scrambling when your tax bill arrives or having to use your profit to cover it.
- Operating Expenses Account – What’s left goes here. This pays for everything else: software, subscriptions, contractors, marketing, office supplies, the lot.
The Allocation Rhythm
On the 10th and 25th of every month (or whenever works for your business rhythm), you allocate money from your Income account to the other four accounts based on predetermined percentages.
These percentages are called Target Allocation Percentages (TAPs). They vary depending on your industry and revenue. Here’s an example of starting percentages for small service businesses:
- Profit: 5%
- Owner’s Pay: 50%
- Tax: 15%
- Operating Expenses: 30%
Important: These are just examples to give you an idea. Your percentages will be different based on your business type, size, and location. The Profit First book has detailed TAPs for different industries and revenue levels, and there are free calculators available online to help you work out what’s right for your specific situation.
Don’t panic if these percentages seem impossible right now. The beauty of Profit First is that you start where you are. If you’re currently taking 0% profit and spending 100% on expenses, you might start with:
- Profit: 1%
- Owner’s Pay: 40%
- Tax: 10%
- Operating Expenses: 49%
Then every quarter, you bump your percentages up slightly, moving closer to your target allocations.
How Profit First Actually Works
It Uses "Bank Balance Accounting"
Most of us (myself included) make spending decisions based on what we see in our bank account. If there’s money there, we spend it. If there’s not, we don’t.
Profit First doesn’t try to change this behaviour. Instead, it works with it. When you look at your Operating Expenses account and see a lower balance, you naturally spend less. You’re not being disciplined or virtuous. You’re just working with what’s available.
It Makes Profit a Habit, Not an Event
Before Profit First, I’d think, “If I have a really good month, then I’ll take some profit.” But guess what? Even in good months, expenses would somehow expand to eat up whatever came in.
Now profit happens automatically, every single time money comes into the business. It’s not something I hope for. It’s something I do.
It Forces Better Business Decisions
When you have less money available for operating expenses, you get really clear about what matters. That subscription you’re not using? Gone. That marketing channel that’s not converting? Cut. That project that’s taking hours but barely breaking even? Time to rethink it.
Constraints breed creativity. Having unlimited funds available means you keep pouring money into things that aren’t working. Having limited funds means you focus on what actually drives results.
My Experience With Profit First
I started using Profit First in 2019. At that point, I’d been in business for nine years, and I was still doing the feast or famine thing with my own pay.
Here’s what changed:
I started paying myself consistently. Every month, the same amount, like clockwork. This made my personal finances so much easier to manage. I could budget. I could plan. I wasn’t stressed about money constantly.
And here’s the beautiful part: over the years, I’ve been able to gradually increase what I pay myself. But only when I knew I could sustain it, and only after I’d built up a buffer in my Owner’s Pay account. I’ve slowly built at least a six-month buffer (I’m at 12 months now), which means even if business has a quiet period, I know I can still pay myself. That security is priceless.
My profit margins increased. When I could only spend what was in the Operating Expenses account, I got ruthless about cutting unnecessary costs. My business became leaner and more efficient.
I stopped panicking about tax bills. The money was already there, waiting. No more scrambling or using profit to cover tax because I hadn’t planned properly.
I felt more in control. Instead of wondering where the money went, I knew exactly where it was and what it was for. That sense of clarity reduced so much stress.
Was it perfect? No. Some quarters I had to adjust percentages because they weren’t quite right for my business yet. In the beginning, sometimes unexpected expenses came up that I hadn’t accounted for.
But here’s what happened: tracking everything this way forced me to get really clear on what I was actually paying for over a full year, not just looking at the next month. So many costs are annual, not monthly. And somehow, most of those annual renewals fall in October and November for me. (Black Friday deals are fun until you actually count the costs.)
Once I understood my full annual expenses, I could allocate properly. The system worked. My business was finally profitable, consistently, and I was finally paying myself properly.
How to Get Started With Profit First
Step 1: Set Up Your Accounts
You need five bank accounts. Most business banks will let you open multiple accounts. If yours charges fees for additional accounts, it might be time to switch to a bank that doesn’t.
Some modern banking solutions even have features specifically for Profit First, with digital “envelopes” or sub-accounts that make allocation easier.
Step 2: Figure Out Your Current Percentages
Look at the last three months of your business (or a full year if you want to be really thorough and capture those annual costs). What percentage of revenue actually went to:
- Your own pay?
- Profit (probably 0%, if we’re honest)?
- Tax?
- Operating expenses?
This is your starting point, your Current Allocation Percentages (CAPs).
Step 3: Choose Your Starting TAPs
Based on where you are now and where you want to be, choose percentages that feel like a gentle stretch. If you’re currently taking 0% profit, start with 1%. If you’re paying yourself 30%, maybe bump it to 35%.
The goal isn’t to jump to perfect percentages immediately. It’s to start moving in the right direction.
Step 4: Create Your Allocation Rhythm
Decide when you’ll allocate funds. The book recommends the 10th and 25th, but if your business works better with a different schedule, that’s fine. I do weekly. The key is consistency.
Set up recurring calendar reminders so you don’t forget. Or better yet, set up automatic transfers if your bank allows it.
Step 5: Pay Yourself (And Take Your Profit)
Now here’s the important bit about actually using the money in those accounts.
Owner’s Pay: You pay yourself this regularly, monthly or every two weeks. But here’s the smart part: don’t immediately pay yourself the full amount that’s in the account.
Let’s say your average monthly revenue is €5,000. With 40% allocated to Owner’s Pay, that’s €2,000 per month going into that account. Pick a number that’s comfortably under that amount, something you know you can sustain even if you have a quieter month. Maybe €1,400 or €1,600 per month (or split into €700 or €800 every two weeks).
The difference stays in your Owner’s Pay account, building a buffer. Over time, that buffer grows to cover several months of pay, giving you security. Then, when you’re confident you can sustain it, you can gradually increase what you pay yourself.
This way, instead of the rollercoaster of €100 one month, €1,000 the next, and nothing the month after, you have a consistent, predictable income AND you’re building financial security.
Profit: This you take quarterly. Every three months, you take 50% of what’s in your Profit account and pay it to yourself as a reward. It’s a profit distribution, a bonus for running a profitable business. This is separate from your regular Owners Pay.
The other 50% stays in the account (or you can move it to a separate profit savings account) and you don’t touch it. This half builds up as a safety net for your business, growing your reserves over time.
Step 6: Review and Adjust Quarterly
Common Concerns (And Why They're Not Deal Breakers)
"I don't even pay myself regularly now, let alone take profit. This feels like too big a step."
I get it. If you’re currently just taking money when you can, the idea of both consistent owner’s pay AND profit feels impossible.
Here’s the thing: currently you’re working for free or nearly free. That’s not sustainable. I want to help you change that so your business feels like something that helps others AND you.
Start with paying yourself consistently first. Even if it’s a small amount. I started with €100 every month because I was just not used to it at all. Work out what you can afford to pay yourself based on your current revenue, and make that your priority. Once that becomes normal (and it will, faster than you think), start increasing it and add 1% to profit.
You don’t have to do everything at once. But you do have to start somewhere. And paying yourself consistently is a better starting point than continuing to work for nothing.
"But I'm barely covering expenses now! How can I take profit first?"
"This sounds like a lot of accounts to manage."
It is more accounts than you’re used to. But modern banking makes this easier than ever. And honestly? The clarity you get from seeing exactly where your money is worth the minor inconvenience of having a few accounts. Most banks allow you to see all accounts in one place. Hopefully yours does too.
Many business owners find that having separate accounts actually makes reconciliation and bookkeeping easier, not harder, because everything is already categorised.
"What if I have a bad month and the allocations don't work?"
Here’s the beauty of using percentages: the system naturally adjusts to your income. If you have a lower revenue month, the percentages mean you’re allocating less to each account. If you have a great month, you’re allocating more. The system is built for variable income.
Early on, you might need to adjust your percentages if they’re not quite right yet. That’s normal. You’re still learning what works for your business.
But once your percentages are dialled in and you’ve built some buffer in your accounts, the percentage-based system handles the ups and downs for you. The goal is consistency in your system over time, not perfection every single month.
"What about my accountant? Will this mess up my bookkeeping?"
Profit First is a cash management system, not an accounting system. It works alongside your accounting software (like Xero or QuickBooks), it doesn’t replace it.
Your accountant might not have heard of Profit First, which can be a bit awkward. I’ve had to explain it to accountants a few times myself, and I’m not an accountant! But once they understand it’s just about how you manage money between accounts, not how you record transactions, most are fine with it. I actually had one bookkeeper who loved it so much he became a Profit First professional!
If you want to make implementation smoother, you could work with a Profit First Professional (PFP). They’re accountants, bookkeepers, or business coaches who are trained in the methodology and can help you set it up properly while keeping your regular accountant happy.
Is Profit First Right for You?
If you’re a coach, consultant, or service provider who’s tired of working hard but always feeling stressed about money, Profit First can change everything. It works brilliantly for solo entrepreneurs and small teams who want steady, profitable growth.
The system is especially powerful if you’ve been stuck in the feast or famine cycle, never quite knowing if you can pay yourself, or watching money disappear despite bringing in revenue.
After Profit First, I made better decisions. I stopped trying to grow my way out of money problems and started focusing on profitable growth instead. The difference between then and now in my bank account is kind of crazy.
Resources to Help You Get Started
Ready to implement Profit First? Here are some resources to help you on your journey:
The Profit First Book: “Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine” by Mike Michalowicz. It’s an easy read with lots of practical examples.
Amber Dugger: Amber is a Profit First Professional who taught me the system back in 2019. Her approach is practical, clear, and perfect for coaches and service providers. I love her stuff and highly recommend checking out her resources if you want guided implementation.
Free Tools: Mike Michalowicz’s website (mikemichalowicz.com) has loads of free resources, including assessment tools and calculators to work out your percentages.
Profit First Professionals: If you want help implementing the system, certified PFPs (accountants, bookkeepers, and business coaches) can guide you through setup and ongoing management.
Banking Solutions: Some banks now offer Profit First-specific account packages that make setup even easier.
Business Detective Course: Profit First helps you manage your money better, but if you’re spending your operating expenses on the wrong things, even the best cash management system won’t fix that. My Business Detective Course helps you investigate your whole business so you can see what’s actually working and what’s draining your resources. You’ll discover which offers are profitable, where your time and money should actually go, and what you can cut without affecting your business. Because Profit First forces you to work with limited operating expenses, you need to be strategic about where that money goes.
Find out more about the Business Detective Course here
Ready to Change Your Relationship with Money?
Six years ago, I was stuck in the feast or famine cycle, never knowing if I could pay myself, always stressed about money despite working incredibly hard. Profit First changed all of that.
I want that for you too!
Your business should support your life, not consume it. You deserve to be paid for the work you do. And profit? That’s not greedy. That’s the reward for taking the risk of running your own business.
You don’t need to have it all figured out tomorrow. You just need to take one step towards paying yourself first instead of last. Follow a masterclass from Amber. Read the Profit First book. Open that first separate account for your incoming revenue so you can see how much you earn. Just start.
