No black box. Here’s the exact method.
This tool applies one named, published framework — Mike Michalowicz’s Profit First — to your own numbers. Here is every step it runs, and where the numbers come from.
Step 1 — find your Real Revenue
Profit First never splits your top line. It splits Real Revenue — what’s left once you subtract the pass-through cost of the job:
real revenue = annual revenue − (materials + subcontractors)
For a shop billing $600,000 a year that spends $200,000 on materials and subs, Real Revenue is $400,000. That $400,000 is the money the business actually keeps to run on, so that’s what gets allocated.
Step 2 — split it four ways
Every dollar of Real Revenue is assigned to one of four accounts:
- Profit — taken first, banked separately, distributed to you quarterly.
- Owner’s Pay — a real wage for the work you personally do.
- Tax — set aside so tax season is a non-event.
- Operating Expenses — everything else it takes to run the shop.
Step 3 — use the target for your band
The right split shifts as you grow. These are the published Profit First Target Allocation Percentages, keyed to your Real Revenue. The tool reads the row for your band and compares it to what you actually do.
| Real Revenue | Profit | Owner’s Pay | Tax | Operating |
|---|---|---|---|---|
| ($0–250K real revenue) | 5% | 50% | 15% | 30% |
| ($250K–500K) | 10% | 35% | 15% | 40% |
| ($500K–1M) | 15% | 20% | 15% | 50% |
| ($1M–5M) | 10% | 10% | 15% | 65% |
| ($5M–10M) | 15% | 5% | 15% | 65% |
| ($10M+) | 20% | 0% | 15% | 65% |
Each row sums to 100%. Source: the Profit First target table (Mike Michalowicz).
Step 4 — start small, then step up
The method’s own guidance is to not jump straight to target. Jerking every dollar into place breaks payroll and scares you off the whole system. You start with a token profit allocation — the tool suggests 1% of Real Revenue — get comfortable, and raise it a little each quarter until you reach the target. That’s why the tool leads with a start-small number, not the finish line.
The honest edges
- Tax is a placeholder, not your rate. The 15% line is the method’s starting point. Your real number depends on entity type and state — confirm it with your accountant. The tool says so on every screen.
- Negative profit is shown, not hidden. If nothing is left after you, tax, and the bills, the tool says so plainly — because that’s the exact situation Profit First exists to fix.
- Zeroes, not errors. Blank or zero inputs return zeroes, never a broken screen — every division is guarded.
- Your numbers only. Nothing is fabricated. Every figure is computed from what you entered.
What we don’t do
We don’t promise income, savings, or results, and we didn’t invent Profit First — it’s Mike Michalowicz’s method, credited here in full. This tool is a mirror for your own business that happens to speak a proven framework, not a sales pitch dressed up as math.
Get your Allocation Plan as a printable one-pager
The split above is yours to keep. Want the detailed version — every account’s target dollars, the gap you’re closing, your quarter-by-quarter glide path, and the first move to make this week — laid out to print or hand to your bookkeeper? Drop your email and it’s yours.
- Target dollars per account, monthly and annual
- Your biggest fixable leak, in plain numbers
- A start-small glide path you can actually stick to