The author acknowledges that many professionals will need to customize the Profit First system in order to make it work for them. The best way to do this is to add any extra accounts which might be necessary for your business. These could include the “Vault” account for short-term emergencies. The author repeats that your business should have about three months of expenses ready in case of dwindling sales. The “Stocking Account” is the best way to set aside money for large, irregular purchases, while “Materials” or “Equipment” accounts help you save and spend more specifically on certain goods your company needs. 

Similarly, accounts labeled “Contractors” and “Employee Payroll” add clarity and remind you that these funds must be paid out to others. Michalowicz reminds the reader that some money, like reimbursements for travel or other expenses, are not revenue and should not be processed as such. They can go to a “Pass-Through” account to avoid confusion. For companies that receive huge payments in advance of long-term work, the author recommends a DRIP account which holds all the funds; take a monthly amount from it until the contract is completed. Accounts like Petty Cash help you stay frugal and keep on track of small, everyday spending, while Sales Tax accounts separate the government’s money from your own.

Accounts must have a clear name as well as a percentage or dollar amount attached to them. Write down your system to keep it clear in your head, and then you can share it with accountants or bookkeepers at any time. Shift your focus from measuring expenses to your RIFA, or required income for allocation. This is the amount of money you must deposit monthly to keep your business running healthily.

Figure out how much your business must make monthly and annually for you to take home your planned salary and profits; this gives you something to aim for and provides complete clarity on what to expect financially and helps you make the best decisions now.

The author warns the reader against raising money from investors, noting that it is a risky endeavor. He encourages people to become routinely profitable before soliciting investments, and to consult an accountant about how to seek and manage investments.

Do not use funds to save your business, but to “amplify” the success you are already having. He then addresses hiring, arguing that companies should make about $150,000 to $250,000 dollars annually in real revenue per employee. These numbers will vary depending on the industry, for example, tech companies will need more money per employee because their labor is more expensive. While hiring can be helpful, always prioritize efficiency.

Michalowicz’s advice in this chapter helps the reader envision how they might implement Profit First in their own business. His exploration of different accounts and how they might be relevant to a variety of business types opens shows his method’s customizability. He explains, “To take Profit First to the next level and customize it for your business…add another account” (148). The author argues that this simple solution is the best way to achieve instant clarity on how your business is really spending and earning. 

By pointing out the connection between insight and action, Michalowicz presents Profit First as foundational to business owners’ decision-making process. Business owners “will make better decisions and be less likely to commit to projects, vendors, and expenditures that do not fall in line with the balances in those accounts” (149). While this chapter acknowledges the limits of the five initial Profit First accounts, it provides detailed alternatives to ensure people in different industries can still use his system.

Chapter Lessons

• Add accounts to meet your business’s specific needs
• Always have a planned amount to distribute to spending and saving accounts
• Focus on your Required Income for Allocation so you are never short of money

Reflection Questions

• How might you customize the Profit First system?
• What extra accounts seemed most relevant to your business? Why?
• Which aspect of the Profit First accounting system is most intuitive to you? Which is most challenging? Will you adjust to it, or try another way?