How to Implement Profit First for Your Business

Set up the Profit First cash management system with separate accounts, percentage allocations, and distribution schedules.

1. Open four separate business accounts. Set up accounts for Profit (10%), Owner's Comp (50%), Taxes (15%), and Operating Expenses (25%). Use the same bank or credit union to enable easy transfers. Add a fifth Revenue account if you want all income to flow through one place first.
2. Start with conservative allocation percentages. Begin with lower profit and higher operating expense percentages than your target. Most businesses start at 5% profit, 25% owner's comp, 15% taxes, 55% operating expenses. Adjust quarterly as you optimize operations.
3. Set transfer dates twice monthly. Move money from revenue to allocation accounts on the 10th and 25th of each month. Calculate percentages based on total revenue received since the last transfer date. Set calendar reminders and stick to the schedule.
4. Pay expenses only from operating account. When the operating account runs low, cut expenses instead of transferring from other accounts. This forces you to operate within true constraints rather than subsidizing operations with profit or owner pay.
5. Distribute profit quarterly. Take 50% of accumulated profit as distributions to owners every quarter. Leave 50% in the account as a cash buffer. This creates regular profit-taking while building reserves.
6. Adjust percentages based on performance. Review allocation percentages quarterly. Increase profit percentage by 1-3% when operating expenses consistently stay under budget. Decrease if you're regularly short on operating cash.