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I'm Mara — I help creatives create and launch digital courses and profitable products. I love chatting about online marketing, design and goal setting!
I’m here to help! I’ve used the Profit First Method as a solo entrepreneur for over two years and yes – It’s as big of a game changer as everyone says it is. The Profit First method helped me get clear on how much I should be paying myself, how much to save for taxes and it also helped me reduce my business expenses so I can take home more of the money I earn.
Here’s everything you need to know to set up Profit First in your own business:
One of the key principles of Profit First is having separate bank accounts for categories in your business. This means that you will probably need to set up 4-5 new checking or savings accounts.
For me this was the hardest step. I had a bunch of mindset stuff I needed to work through before I got serious about implementing this system. Having all of these different bank accounts felt clunky and confusing.
Trust the system – This process works and while setting up new bank accounts might feel tedious, I can tell you that two years in I love having separate accounts for my funds. It doesn’t feel clunky or confusing at all.
If you’re worried about keeping track of doing the math each month for your Profit First percentages you can grab a copy of the spreadsheet I use every time I do a profit first distribution below.
To actually setup your new bank accounts you just need to ask your bank or go online and do it. A lot of banks will allow you to open a new account online. Be careful about any extra fees or minimums you would need to keep in the account. The original bank I used for my business actually had a strange rule that you couldn’t have more than two checking accounts under one business, so I ended up googling local credit unions in my area, called a few up, asked if they had heard of Profit First and if there was an issue with having multiple accounts.
These are the accounts Mike Michalowicz recommends setting up for the Profit First Method:
I use the same structure, but I named my accounts slightly different things to remember what each one was. Here are the accounts I currently have in my business:
*My profit and tax accounts are both savings accounts. The rest are checking accounts. Either one is ok, but I like the extra interest boost savings accounts have.
Now that you have your accounts you need to choose the percentage you’re going to put in each fund. Mike Michalowicz has a handy chart in Profit First to help you get started.
Here’s my current percentage breakdown:
It’s important to know that you can change your percentages at any point. I review my percentages quarterly and sometimes make adjustments. Most people get tripped up on the tax percentage. The amount you’re saving for taxes depends heavily on where you live, how much money you’re making and a several other factors. You can ask an accountant for advice or most people start somewhere between 20 to 30% until they have a better idea of what they need to save. For me personally 20% has covered my tax expenses and left me with a bit of money left over at the end of the year.
Now comes the part where you get to actually pay yourself! All of the money you make in your business is going to go into one account, your “Income” account or as I call it in my business “Money In.” Then that money sits there until your distribution day when you go into your bank and split it all up. Most business owners distribute their money twice a month. Personally I distribute mine each week as I like to pay off my business credit card and have just made Profit First part of my weekly bookkeeping routine.
Whatever day you choose is ok and you can always change it. If you miss the “official” distribution day just distribute your money the next chance you get.
At the end of each quarter I take some time to review my Profit First system. I evaluate my percentages and make sure they are still working for my business and I rebalance any funds that may have grown too large such as moving some money out of my operations and expenses into owner pay.
I also pay myself a quarterly bonus from my Profit account which is an idea I stole from Nick True. Each quarter I pay myself 50% of the balance in my Profit account. This allows my Profit account to continue to grow each month, without feeling like I have a ton of money just sitting around that I could be investing or enjoying.
That it – that’s the entire system! After two years Profit First runs pretty seamlessly in my business. It takes me about 5-10 minutes each week to implement and about 20 minutes once a quarter to review.
Have any questions? Comment below or send me a note on Instagram @MaraKucirek