Profit-First Freelancer Calculator
Profit isn't what's left — it's what you take first. Enter monthly revenue and see the Profit First allocation: pay yourself, take profit, cover tax, and run the business on the rest.
Your Profit First allocation
Why profit comes first
The traditional formula — Revenue − Expenses = Profit — makes profit an afterthought, and afterthoughts rarely survive. Profit First flips it: Revenue − Profit = Expenses. You allocate profit the moment money arrives, then force the business to run on what's left. Constraints breed creativity; leftovers breed excuses.
The percentages above are the standard starting point for businesses under $250k revenue (from Mike Michalowicz's Profit First). As revenue grows, the profit and tax percentages rise and owner's pay percentage falls — the book has the full table.
How to run it (the 5-account system)
Open separate bank accounts: Income, Profit, Owner's Pay, Tax, Operating Expenses. Twice a month, allocate every dollar of income by the percentages. Pay yourself from Owner's Pay. Profit accumulates — quarterly, take half as a distribution and leave half as a buffer. Tax sits untouched until quarterly estimates are due.
Start small if 5% profit feels impossible — even 1% builds the habit. Increase 1% per quarter. The habit matters more than the percentage.
Freelancer-specific tweaks
Freelancers often conflate owner's pay with profit — they're different. Owner's pay is your salary for the work; profit is the reward for owning the business. Separating them reveals whether your business is profitable or just your labor is. Also: the 15% tax reserve is a floor, not a ceiling — high earners need 25–30%. Pair this with the tax set-aside calculator for precision.
Frequently asked questions
What is the Profit First method?
A cash-management system where you allocate profit first (Revenue − Profit = Expenses) instead of last. Money is divided into separate accounts — Profit, Owner's Pay, Tax, Operating Expenses — every time income arrives.
What are the Profit First percentages?
For businesses under $250k revenue: 5% Profit, 50% Owner's Pay, 15% Tax, 30% Operating Expenses. Percentages shift with revenue — the book provides the full table.
How is profit different from owner's pay?
Owner's pay compensates your labor; profit rewards ownership. A freelancer can pay themselves well while the business itself loses money — separating them shows the truth.
How often should I allocate?
Twice monthly (e.g., the 10th and 25th). Regular allocation beats perfect allocation — the rhythm is what makes it stick.
Can I start Profit First with 1%?
Yes — starting at 1% profit and increasing quarterly is the recommended on-ramp. The habit of allocating first matters more than the starting percentage.
Run the numbers
Educational estimates based on standard Profit First starting percentages. Not financial advice — adapt percentages to your revenue level and consult a professional.