Why You Need to Change Your Profit First Allocations and How to Do It
December 27, 2023
by Shannon Simmons

The surest way to ensure you have the cash you need for the expenses in your business is by implementing Profit First. It creates the guardrails you need to stop spending what’s in your bank account and start holding some aside for things like owner’s pay, taxes, operating expenses, payroll, and future large expenses.

When you first start using the Profit First system, you set up your bank accounts and complete an Instant Assessment of your business to determine what percentages of your revenue you will allocate to the various accounts. (Find out more about how to complete the Instant Assessment here.)

And then you work the system.

But your business grows. Or maybe you go through a period of retracting and things slow down. Either way, your revenue changes.

And since you built out your initial Profit First allocations based on your revenue, that initial assessment is no longer accurate. It’s time to change your Profit First allocations.

Why Change Profit First Allocations?

A lot can happen in your business over the course of a quarter or a year. We’ve seen in the last few years how quickly businesses have to contract or shift gears in order to keep their doors open.

In 2020 and 2021, we saw too many businesses in the health and wellness industry shut their doors because they didn’t have the emergency savings needed to pivot and create services that operated virtually.

And while many businesses stayed open, revenue was very different from what they were used to. Without changing Profit First allocations, business owners found themselves borrowing from different accounts to ensure bills were paid on time. Too often that meant that the owner’s pay suffered.

If they had just analyzed their current Profit First allocations and made adjustments based on where their revenue and need was, those business owners would have felt a lot more comfortable with where their finances were.

As business started going back to some sort of normal, the shift looked a little different. Some business owners found that there was an abundance of cash in their Operating Expenses or Owner’s Pay accounts. This is great news! But it’s not an invitation to spend.

Instead, an adjustment is needed based on the goals of the business owner. A larger percentage of revenue can go to Profit or to an Advanced Account to save for a large purchase.

It helps to consult a Profit First Professional to help set goals and determine where the additional funds should go. You can also make some of these adjustments yourself, with a little bit of help.

And luckily, you no longer need to go through the entire Instant Assessment process again.

How to Change Profit First Allocations

The Instant Assessment is a great tool for getting started with Profit First, but it’s time-consuming and imperfect. Especially since it doesn’t give you feedback in the moment. It doesn’t show you what your current and actual allocations are and how you’ve made self-adjustments over time.

A better option is a tool that helps you calculate your current allocations based on your current revenue and shows you your current allocations each month and quarter, compounded.

And wouldn’t it be great if this same tool highlighted any deviations from your current allocations so you could make any necessary adjustments each quarter?

Sound too good to be true? It’s not. This tool does exist.

A few years ago, we built a Keep More Money Dashboard to help show our clients how their Profit First allocations were working for them. And while we still use the dashboard with our 1:1 clients, we know how valuable it is for the business owner who wants to DIY their Profit First system.

And so we’re making it available to you.

The dashboard is literally THE missing piece to the Profit First system. It showcases the progress you’ve made in your business and helps you make adjustments when you feel like you’re “borrowing” from one account to fund another.

It’s an incredibly simple plug-and-play method with all the formulas you need already built in.

Find out more about the dashboard and get yours today!