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Most freelancers run their business on whatever happens to be left after they spend — and call the leftover "profit." Profit First flips it: take your real revenue, send fixed slices to profit, your pay, and taxes first, and run the business on what remains.
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Profit First is a cash-management method popularized by Mike Michalowicz's book of the same name. The traditional accounting formula is Sales − Expenses = Profit, which treats profit as an afterthought — whatever happens to be left once you've paid for everything else. The trouble is that there's almost never anything left, because spending expands to fill whatever's in the account. Profit First rearranges the equation to Sales − Profit = Expenses: you take your profit (and your pay, and your taxes) off the top, the moment money arrives, and force the business to operate on what remains.
For a freelancer or solo business that usually means four "buckets," each ideally a separate bank account:
First it finds your real revenue — total revenue minus genuine pass-through costs like materials bought for a client or a subcontractor's invoice. That money flowed through you but was never yours to allocate, so Profit First removes it before anything begins. Then it splits the real revenue by your target percentages:
The four percentages always add up to 100, so the four dollar amounts always add back to your real revenue — that's the bottom row of the second ledger, and it reconciles exactly. The OpEx slice is whatever's left after profit, pay, and tax, which is precisely the point: profit isn't the leftover anymore — the expenses are.
The book publishes "Target Allocation Percentages" (TAPs) that step down as a business grows — a solo freelancer at the smallest revenue tier commonly starts near 5% profit, 50% owner's pay, 15% tax, 30% OpEx, which is what this tool loads by default. They're a starting dial, not a law: a service business with almost no overhead can pay itself far more than a studio carrying software and contractor costs. The honest way to begin is to set the sliders to your current reality first, then nudge profit up a point or two each quarter — small enough that the business barely notices, persistent enough that it's suddenly profitable.
No — and keeping them separate is the heart of the method. Owner's Pay is your wage for doing the work; if you stopped and hired someone to replace you, that's what you'd pay them. Profit is the return for owning the business, on top of your wage. A business that only pays its owner a wage and never makes a profit isn't really profitable — it's just a demanding job you happen to own.
If you bill a client $10,000 but $4,000 of that goes straight to a subcontractor or to materials you bought for them, only $6,000 was ever really your business's to keep. Allocating percentages off the full $10,000 would over-pay every bucket and starve the business. Profit First calls the $6,000 your "real revenue," and every percentage applies to that number. If those pass-through costs swallow most of the invoice, that's a pricing signal — mark them up.
It's the mechanism that makes the method work, not just paperwork. When profit, tax, and pay physically leave the main account the day money arrives, the only balance you ever "feel" — and spend from — is OpEx. You can't accidentally dip into the tax money to cover a slow month if it isn't sitting there. Most banks let you open several free checking or savings accounts; that small bit of friction is the entire trick.
The percentage here is a savings target, not a tax calculation — it builds a reserve so the bill is already funded. To size it accurately for your income, run the numbers through our quarterly estimated tax calculator and our self-employment tax calculator, then set the slider to match. Profit First is a cash-flow habit; it doesn't replace doing the tax math.
No. Every calculation runs entirely in your browser — nothing you type is sent to a server or stored. The link in your address bar updates so you can bookmark or share a scenario, but that link only contains the numbers you chose.
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Turn the Owner's Pay you set here into a household plan — needs, wants, and savings.
Size the tax slice precisely — what to send the IRS each quarter, and when.
Your profit reserve is one cushion; size the cash safety net that bridges dry spells.