Take profit off the top.
Run the business on what's left.
Most small businesses use the formula Sales minus Expenses equals Profit, and end up with no profit at all. That's not a math problem. That's a behavior problem.
Profit First flips the formula: Sales minus Profit equals Expenses. Every deposit gets sliced into separate accounts before you spend a dollar. Profit, owner's pay, and taxes get protected first. What's left is what runs the business.
The Big Idea: Small Plates
When you eat off a giant platter, you fill the platter. When you eat off a small plate, your portion looks normal and you eat less. Same food, different container.
One giant operating account is a giant platter. Profit First gives your business smaller plates. The money for profit, taxes, and your paycheck is physically out of reach, so the business runs lean by design instead of by willpower.
The Five Accounts
What this calculator does
- Walks you through the system in plain English (no accounting jargon)
- Asks six short questions about your situation
- Recommends starting allocations with a clear explanation of why each number
- Gives you the operational playbook: bank setup, allocation rhythm, quarterly distributions, and the rules that make it stick
A few quick basics.
Three short questions. Your answers shift the recommended percentages, since a side hustle and a full-time business need very different allocations.
This shifts how much money goes to your paycheck vs. profit and runway.
Full-time: The business has to pay your bills. Owner's Comp needs to be substantial, around 50% of revenue when you're starting out.
Side hustle: A day job covers your life. The business can route more money into Profit, gear, and growth instead of paychecks. We'll bump Profit up and shrink Owner's Comp.
Either way, you should still pay yourself. The Owner's Comp account exists even if you "don't need the money" right now. Habits compound.
This shapes how taxes flow through to you.
Sole Prop / single-member LLC: Profits flow to your personal taxes. The Tax account funds your quarterly estimated payments to the IRS.
S-Corp: You're on payroll, taxes withheld from your paycheck. You still keep a Tax account so the business reimburses you for personal estimateds. If you don't, withholding feels like a pay cut and you'll resent the system.
Bottom line: the 15% Tax allocation stays no matter the entity. The behavior matters more than the bookkeeping mechanics.
Best guess in dollars. The Profit First targets shift as a business gets bigger.
As revenue grows, Owner's Comp shrinks (you hire and pay employees from OpEx) and Profit grows. The official Profit First targets:
- $0 to $250K: Profit 5%, Owner 50%, Tax 15%, OpEx 30%
- $250K to $500K: Profit 10%, Owner 35%, Tax 15%, OpEx 40%
- $500K to $1M: Profit 15%, Owner 20%, Tax 15%, OpEx 50%
- $1M+: Profit 10%, Owner 10%, Tax 15%, OpEx 65%
You're in the band.
Now the financial reality.
Three more questions. These help us spot pricing problems and tune the recommendation to your situation.
Editors, second shooters, motion graphics, sound, drone ops, talent, location fees, music licenses, stock footage.
What counts: anyone paid per-project (1099 contractors), plus pass-through costs like locations, talent fees, license fees, and stock assets.
What doesn't count: your own labor, full-time employees, software subscriptions, gear you own. Those are operating expenses.
This concept is called Real Revenue in the book: total income minus materials and subs. If your subs are above 20% of a typical job, your topline numbers will eventually mislead you. We'll flag it if so.
Heads up: Your pass-through costs are high enough that running allocations on topline will eventually distort your numbers. Worth adding a separate Materials & Subs account in 90 days.
The Math Problem
Say you book a $10,000 video project, but $3,000 goes straight to a freelance editor. You actually keep $7,000.
If you run Profit First on the full $10,000 (topline) at 5/50/15/30:
The editor's $3,000 has to come from OpEx. You cut that check and OpEx is now $0, with no money left for rent, software, ads, or anything else until the next allocation. Meanwhile your "5% Profit" is really closer to 7% of what you actually keep. The numbers lie.
The Fix: A 6th Account
Add an account called Materials & Subs. Every deposit gets sliced like this:
- First, peel off your typical sub % into Materials & Subs (e.g., 30% on every deposit). That money is reserved to pay the freelancers/licenses/talent.
- What's left is your Real Revenue, money the business actually owns.
- Then apply Profit First percentages to that Real Revenue.
Same $10K deposit, but with M&S:
OpEx is now $2,100 of clean operating money instead of $0. Profit is honestly 5% of what you keep. The system tells the truth.
When to Add It
Either in 90 days (once you've got the 5-account rhythm down), or right now if you'd rather set it up correctly from day one. Both are valid. Adding it later is fine; just be aware your topline numbers will be slightly optimistic until you do.
Credit cards, equipment loans, SBA, family loans.
If yes, your quarterly Profit distribution flips to debt-snowball mode: 95% attacks your smallest debt, 5% is yours to celebrate. You keep the profit habit alive while killing debt fast.
Why smallest first instead of highest interest? Behavioral. Quick wins build momentum. The math difference is small; the habit difference is huge.
Rent / mortgage, food, gas, insurance, phone, debt minimums. The bare survival number.
This is a sanity check. If 12 months of your projected Owner's Comp can't cover this number, the business has a pricing problem or you need outside runway. Profit First will surface that fast. It won't fix it for you.
Here's where every dollar goes.
Why these numbers, for you
Heads up: pricing won't cover your life
Profit First will surface this. It won't fix it. Three ways to close the gap: raise prices, lower personal expenses, or fund the gap with outside runway (savings, side income, partner support).
Make it yours.
Adjust the sliders below. Operating Expenses is whatever's left over, and that's the whole point: you force the business to fit a smaller plate.
The Ramp Strategy
Don't try to nail your final numbers today. Pick a starting point, run for 90 days, then bump Profit up 1 to 2 points and trim OpEx by the same. Repeat every quarter until you hit your targets. Trying to jump from 0% profit to 10% in one move usually fails. Slow ratchet wins.
Whatever's left after Profit, Owner's Comp, and Tax. Force yourself to live within this.
Enter a deposit amount. See exactly how to split it across your accounts.
Your complete plan.
The allocations, the bank setup, the rhythm, and the rules.
1. Your Allocations
For a sample deposit, that means:
| Deposit | |
|---|---|
2. What Each Account Is For
A holding tank. Every deposit lands here first. You never spend from this account. It's only purpose is to accumulate money between allocation days.
Your reward for taking risk. Hands off until quarterly distribution day. This is not for reinvestment, not for "I'll use it next month if I'm short," not for emergencies (that's what the Vault is for). It's profit. Treat it like it doesn't exist between distributions.
Your paycheck. Pay yourself a predictable amount on a predictable schedule, like a real job. If you're an LLC/sole prop, take draws on the 10th and 25th. If you're an S-corp, fund payroll from this account.
Reserved for the IRS, state, and self-employment tax. Covers both the business's taxes and your personal estimated payments. Even if you're on payroll with withholding, you keep this account so the business reimburses you. Otherwise withholding feels like a pay cut and the system fails behaviorally.
Everything else: software, gear, ads, payroll, contractors, supplies, rent. If this runs dry before the next allocation, you DO NOT raid the other accounts. You delay, renegotiate, or cut. That is the system telling you costs are too high.
3. Set Up the Accounts
Use a bank with no per-account fees and no minimums. Profit First's official banking partner is Relay (free, 20 accounts, percentage-based auto-transfers, ~10 minute setup). A local credit union also works.
Bank 1 (operations, daily access)
- •Income
- •Owner's Comp (linked to your personal account for transfers)
- •Operating Expenses (this is the only one with a debit card)
Bank 2 (out of sight, no debit card)
- •Profit
- •Tax
Why two banks? Temptation removal. Money you can see and easily move to OpEx will get moved to OpEx. A different bank with a 1-2 day transfer delay creates just enough friction to keep your hands off Profit and Tax. Many people use a separate online savings account or credit union for Bank 2.
4. The 10/25 Rhythm
Twice a month, on the 10th and 25th, you do two things:
- Take whatever's in Income and split it across the four other accounts using your percentages.
- Pay all bills due only from OpEx.
Why these dates? Bills land at vendors by the 15th and end of month, which lines up. Twice-monthly batching is more efficient than ad-hoc transfers, and it lets you start to see cash flow waves: when income piles up vs. drains, you spot trends.
Rule of thumb: don't go more frequent than weekly, and don't allocate sporadically. The pattern is the point.
5. Quarterly Distributions
On the last business day of March, June, September, and December:
Take 50% of your Profit account balance as your owner bonus. The other 50% stays as a rainy-day cushion.
This is the reward for taking the risk of running a business. It is not for reinvestment, not for paying down debt, not for buying gear. It's profit. Spend it on yourself or save it. Anything else defeats the system.
Debt-snowball mode: 95% of your Profit balance attacks your smallest debt as a lump-sum payment. The remaining 5% is a small reward to keep the habit alive.
Why smallest debt first instead of highest interest? Behavioral momentum. Small wins compound into the consistency you need to keep going. Once all debt is gone, switch back to the standard 50/50 owner-bonus rule.
6. The Rules That Make It Stick
- 01 No raiding. When OpEx runs dry, you cut, delay, or renegotiate. You do not pull from Profit, Tax, or Owner's Comp. That's the system working as designed.
- 02 No peeking at Bank 2. Profit and Tax accounts are out of sight on purpose. Don't log in just to check the balance. The temptation builds with familiarity.
- 03 Re-tune every 90 days. Bump Profit up 1 to 2 points each quarter. Trim OpEx by the same. The discipline forces efficiency.
- 04 Don't run up expenses to cut taxes. Spending $10 to "save" $3 in taxes is a $7 loss. Run the business as profitably as possible and pay the tax.
- 05 Start now even if it's 1%. Don't wait until you're "profitable enough." The system forces profitability. Starting at 1% and ramping is dramatically better than waiting.
- 06 Don't skip Tax just because you're on payroll. Withholding feels like a pay cut. The Tax account is what reimburses you, restoring the felt income. Keep the account no matter your entity type.
7. Your First-Week Checklist
- 1 Open 5 accounts (Income, Profit, Owner's Comp, Tax, OpEx). Use Relay or a credit union.
- 2 Move Profit and Tax to a second bank (or separate online savings) with no debit card.
- 3 Update payment processors (Stripe, ACH, etc.) to deposit into Income, not your old operating account.
- 4 Set calendar reminders for the 10th and 25th of every month, plus the last business day of each quarter.
- 5 Run your first allocation on the next 10th or 25th, whichever comes first. Don't backfill historical money. Start fresh.
- 6 Re-run this calculator in 90 days and bump Profit up 1 to 2 points.