For most small business owners, the traditional financial equation goes something like this: make sales, pay everyone else, and hopefully there’s something left over for you. It’s the norm—but it’s broken. And it’s one of the biggest reasons why so many founders burn out while their bank balance barely budges.
That’s where the Profit First system comes in. Developed by Mike Michalowicz, it’s a simple yet powerful approach to managing cashflow that flips the equation and makes your pay and your profit a priority—not an afterthought.
Here’s the core idea:
Instead of Sales – Expenses = Profit,
we flip it to Sales – Profit = Expenses.
What does this mean in practice? It means you start allocating profit as soon as money comes in—not months later, and not when it’s convenient. You learn to operate your business within what’s actually available. That clarity changes everything.
The psychology behind Profit First
One of the things I love about this system is how it acknowledges human behaviour. We’re visual beings—we make decisions based on what we see in the bank, not what’s in Xero. Profit First works with that, not against it, by using multiple bank accounts to create boundaries and visibility.
Instead of one account where money comes in and spills out, you allocate it across purpose-driven accounts: profit, owner’s pay, tax, and operating expenses. If you’re in Australia, I also recommend separate accounts for GST, super, and PAYG withholding.
Start small—but start
You don’t need to overhaul your business in one day. I always tell my clients to start with just one account—your profit account—and begin with 1%. It’s about building a habit, creating rhythm, and feeling in control again. From there, you can adjust your percentages as your business evolves.
More than just numbers
For me and many of my clients, Profit First is about more than money. It’s about agency. It’s about knowing your numbers without feeling overwhelmed. And it’s about seeing actual rewards for the hard work you put in.
It doesn’t matter what stage of business you’re in—this system can support you to grow sustainably, pay yourself consistently, and finally feel like the CEO you set out to be.
So if you’ve been putting off looking at your numbers, take this as your sign to start small, start today—and start putting profit first.
