Skip to content
The Times USA
Menu
  • ABOUT
  • CONTACT
  • LIFESTYLE
  • NATIONAL NEWS
  • BUSINESS
  • INTERNATIONAL NEWS
  • TECHNOLOGY
  • PRICE OF BUSINESS SHOW AUDIOS
Menu

What Is Profit First Accounting?

Posted on February 19, 2025February 20, 2025 by admin

Mike Michalowicz’s book Profit First introduces a cash management system designed to make profitability a habit, not a distant dream. It challenges the traditional accounting formula of Sales – Expenses = Profit, arguing that this often leaves profit as an afterthought. Instead, Profit First prioritizes profit by allocating a percentage of revenue to it first. Here’s how it works:

  • The Core Concept: The system revolves around allocating a predetermined percentage of revenue to different accounts, including profit, owner’s pay, operating expenses, and taxes. This ensures profit isn’t what’s left over, but a planned allocation.
  • Bank Accounts: Profit First recommends opening multiple bank accounts for each allocation. This physical separation makes it easier to track and manage finances, preventing the temptation to dip into profit for other expenses.
  • Allocation Percentages: The book provides target allocation percentages for different business sizes and industries. These percentages serve as a starting point, and businesses can adjust them based on their specific needs and goals.
  • Profit First Distribution: On a regular schedule, typically quarterly, the allocated profit is distributed to the owner. This reinforces the habit of prioritizing profit and provides a tangible reward for business success.
  • Owner’s Pay: Similar to profit, owner’s compensation is also allocated a percentage of revenue. This ensures the owner is paid fairly for their work.
  • Operating Expenses: This account covers the day-to-day costs of running the business. By allocating a specific percentage, businesses can control spending and avoid overspending.
  • Taxes: Setting aside a portion of revenue for taxes helps avoid a large tax bill at the end of the year. This proactive approach to tax management reduces financial stress.
  • The “PAP” (Pay Attention Percentage): This concept is introduced in later books. The PAP is the total percentage of revenue allocated to profit, owner’s pay, and taxes. It helps business owners understand the total amount they are taking out of their business.
  • Regular Reviews: The system encourages regular reviews of the allocations and adjustments as needed. This dynamic approach ensures the system adapts to the changing needs of the business.
  • Simplicity: Profit First is designed to be simple and easy to implement, even for those with limited financial knowledge. The clear allocation percentages and regular distributions make it easy to follow.
  • Behavioral Change: Beyond the numbers, Profit First is about changing the mindset around profit. It encourages businesses to prioritize profit from the start, rather than treating it as an afterthought.
  • Scaling: The system can be scaled as the business grows. As revenue increases, the allocation percentages can be adjusted to maintain profitability.

You Might Also Like...

  • The Big Difference Between Profit and Wealth

    FROM THE PRICE OF BUSINESS, Media Partner of This Website   Recently Kevin Price, Host of…

  • Small Business Is Big Business

    INTERVIEW ON THE PRICE OF BUSINESS SHOW, MEDIA PARTNER OF THIS SITE. Recently Kevin Price,…

  • Price and Mulligan Discuss Profit in Healthcare and Its Critics

    INTERVIEW ON THE PRICE OF BUSINESS SHOW, MEDIA PARTNER OF THIS SITE. Recently Kevin Price,…

  • 5 Best Practices For Designing A Non-Profit Website

    Over the past few years, the web has evolved extensively, and every business must have…

  • The Original Series at Price of Business

    The Robert Kiyosaki Rich Dad Poor Dad 20th Anniversary Series A Series on the Price…

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

VIDEO: This Week’s Best of our Network

https://www.youtube.com/watch?v=de35FQzRYQE

GDPR Compliance

USABR does not collect data on its visitors.  For more information visit: https://www.usabusinessradio.com/contact-us/

Contact

Contact articles@usabusinessradio.net for more information on articles on this site. BMuyco@usabusinessradio.net for all other information.

Recent Articles

  • PR Is Still Key for Growing Companies, but It’s Changed
  • How QA and Cybersecurity Combine To Build Trustworthy Digital Products
  • A Strategic Approach to Succession Planning: Maintaining Your Corporate Culture and Operational Efficiency During a Succession
  • Leadership Flow
  • The Corporate Transparency Act—a Legal Trap for the Unprepared

Also in TTUSA

  • 5 Reasons Not To Go Onto The Dark Net
  • To B or not to B
  • Top Gun: Maverick Appears to be a Celebration of Tom Cruise
  • Trump’s War on Birthright Citizenship
  • 15 Ultimate Ways to Remain Organized at Work

RSS The Daily Blaze

  • A Renaissance for Nuclear Energy in the United States
  • Secrets to Maximizing Wildfire and Hurricane Insurance Claims
  • Leading National Security Expert Unboxes Us Attack of Iran
  • Everything You Need To Know About Vincent Lynch, Evolutionary Biologist
  • The Acquittal Artists: How Diddy’s Legal Team Turned a Legal Disaster Into a Near-Miracle

RSS USA Business Radio

  • Broadcasting Business Influence. On Air and In Print
  • Why Dry July Is Just the Beginning
  • Testing the Claims of an Ancient Icon
  • A Fence at the Top of the Cliff
  • The Changing Face of Luxury Travel

RSS USA Daily Times

  • The Smartest Way To Scale ServiceNow: People, Not Just Platform
  • Where Price Meets Prestige: A First-Class Travel Experience
  • Luxury Travel in Hawaii and the South Pacific
  • Sail the World and Write Your Travel Story
  • From Isolation to Inspiration: How Music for Mental Health Is Healing the Loneliness Epidemic

RSS USA Daily Chronicles.

  • Fortify Your Front Door With the Right Lock
  • David H. Souter, Retired U.S. Supreme Court Justice, Dies at 85
  • 3 Enlightened Things You Need To Know if You Feel Like You’re Losing Your Mind
  • Let’s Prevent Child Abuse Every Month
  • Bringing Resilience and Simplicity Into Life With MS

RSS Price of Business

  • How Employers Must Navigate California Business Law
  • Sen. Thom Tillis Rebukes Both Parties in Announcing Retirement
  • Secrets to Maximizing Wildfire and Hurricane Insurance Claims
  • What the Fed’s Interest Rate Hike Means for Your Business
  • “Furniture Movers” and more on PriceofBusiness.com: Latest Guest Posts & Articles for July 4th 2025

RSS US Daily Review

  • The Fit That Matters
  • Sen. Thom Tillis Rebukes Both Parties in Announcing Retirement
  • How To Optimize for AI Search
  • NiaLena Caravasos’ Commentary Feature on the Price of Business Digital Network
  • Elections Matter

PoB Digital Network

US Daily Review

USA Business Radio

USA Daily Chronicles

USA Daily Times

The Daily Blaze

The Times USA

Price of Business

© 2025 The Times USA | Powered by Superbs Personal Blog theme