How to Take Profit First: A Beginner’s Guide for Small Business Owners

Feeling like your business is earning more but keeping less? You’re not alone. Many small business owners struggle with cash flow, savings, and profit — even when revenue is steady. That’s where the Profit First Method comes in.

In this beginner’s guide, you’ll learn how to apply the Profit First system step by step — and how our Profit First Calculator can simplify it all for you.

How to Take Profit First

What Is the Profit First Method?

The Profit First Method, developed by Mike Michalowicz, flips traditional accounting on its head. Instead of this:

Revenue – Expenses = Profit

You do this:

Revenue – Profit = Expenses

By taking out profit first, you force your business to live within its means — which helps eliminate waste, overspending, and financial stress.

Step-by-Step: How to Apply the Profit First Method

  1. Know your revenue: Look at your average monthly or quarterly income.
  2. Allocate by percentage: Assign a fixed percentage of revenue to:
    • Profit
    • Owner’s pay
    • Taxes
    • Operating expenses
  3. Separate accounts: Create actual bank accounts for each allocation.
  4. Transfer weekly: On a set day, move money into those accounts.
  5. Use only what’s available: Don’t dip into the profit or tax funds.
💡 Want to simplify the math? Use our Profit First Calculator to plug in your income and get instant breakdowns.

Why Profit First Works (Especially for Small Businesses)

Most entrepreneurs are naturally focused on growth — more sales, more clients. But without built-in profit, your business can feel like a hamster wheel. Profit First makes sure you’re not just working *in* your business but building *wealth* from it.

This system also helps with:

  • Building emergency funds
  • Paying yourself consistently
  • Making tax time stress-free
  • Eliminating unnecessary expenses

Common Mistakes to Avoid

  • Changing percentages too often — stay consistent for at least 3 months.
  • Skipping the transfers — automation is key.
  • Using profit or tax accounts to bail out overspending.
  • Not reviewing real performance quarterly.

Connect the Dots: What’s a Good Profit Percentage?

Not sure how much profit you should aim for? Check out our article on ideal small business profit margins for realistic benchmarks.

See It in Action

Want proof that Profit First really works? Read our real-world case study of a startup that used this method to escape financial chaos.

Start today: Use our free Profit First Calculator to split your income into smart allocations.

📌 Bookmark this guide, revisit your numbers monthly, and stay focused on building not just a business — but a sustainable income and lifestyle.