Profit First Allocation Calculator

Enter real revenue, not automatically gross sales

Profit First is a cash-management method created by Mike Michalowicz. It reverses the familiar “sales minus expenses equals profit” sequence by allocating profit before deciding what remains for operating expenses. The method uses separate accounts and Target Allocation Percentages, commonly shortened to TAPs.

The key input is real revenue. For a consultant with no subcontractors or materials, real revenue may equal collected revenue. An agency should first remove client reimbursements and subcontractor pass-through costs. A product business should first remove inventory or cost-of-goods amounts treated as pass-through. The calculator's business-type choice explains that distinction; it does not invent different percentage tables for each label.

The general TAP grid is based on annual real revenue. The percentages used here are the table published with the Profit First method and book and reproduced in Relay's Profit First account guide: under $250,000 uses 5% profit, 50% owner's pay, 15% tax, and 30% operating expenses; $250,000–$500,000 uses 10%, 35%, 15%, and 40%; $500,000–$1 million uses 15%, 20%, 15%, and 50%. Higher tiers continue with the published grid through $50 million.

Rates current as of September 2026.

How the calculator chooses a tier

The entered month is multiplied by 12 to estimate annual real revenue. That annualized amount selects a tier, and each allocation is monthly real revenue multiplied by the tier percentage shown under the result. The four allocations always total 100%.

Annualizing one month is convenient but can misclassify a seasonal business. For a better tier decision, enter average monthly real revenue from the latest 12 months. If the business is growing quickly or a single project distorted the average, compare adjacent tiers and review the choice with current financial statements.

For a worked 2026 planning example, a service business enters $20,000 of monthly real revenue after pass-through subcontractor costs. Annualized real revenue is $20,000 × 12 = $240,000, placing it in the published under-$250,000 target tier. The calculation allocates $1,000 to profit at 5%, $10,000 to owner's pay at 50%, $3,000 to the tax account at 15%, and $6,000 to operating expenses at 30%. Those four amounts total the entered $20,000. The 15% tax allocation is a cash target from the method, not a 2026 tax rate or proof that $3,000 covers the owner's liability.

The ranges are implemented with the upper boundary in the lower tier: exactly $250,000 annualized uses the first column, while an amount above $250,000 enters the next. Published summaries sometimes format boundaries without specifying the treatment of the exact dollar; this convention keeps the behavior explicit and has negligible practical effect.

Targets are not starting commands

TAPs are benchmarks, not instructions to transfer money the business does not have. First calculate current allocation percentages from actual results. If operating expenses currently consume 60% and the target says 30%, moving in one step could make payroll or committed bills impossible. The method commonly recommends beginning with a small profit habit and moving allocations gradually.

The tax bucket deserves separate verification. A fixed 15% target is part of the general table, but it is not a tax projection. Entity structure, payroll, state and local taxes, deductions, credits, prior payments, and the owner's total income can change the amount needed. Keep tax funds separate, then compare the bucket with estimates prepared from actual return facts.

Product companies may also need a dedicated inventory account, and agencies may need a subcontractor account before applying these four percentages. Employees are generally operating expenses rather than pass-through costs. Misclassifying ordinary overhead as pass-through can overstate margins and select the wrong tier.

Common mistakes and edge cases

• Entering gross sales without removing true pass-through costs can select an inflated revenue tier.
• Removing normal payroll or overhead as “pass-through” can make real revenue and operating needs look artificially low.
• Jumping directly from current allocations to targets can leave committed bills unfunded.
• Treating the tax percentage as a tax projection ignores entity, state, payroll, and household facts.
• Annualizing one unusually strong or weak month can put a seasonal business in the wrong tier.

Use the output as a monthly conversation: can the operating account support planned spending, is owner pay realistic, and is the business moving toward a durable profit allocation? Revisit real revenue and current percentages at least quarterly.

What to do next

Calculate trailing-12-month real revenue and current allocation percentages before moving cash. Compare the current and target columns, choose a small first adjustment, and verify that payroll and fixed obligations remain covered. Put tax money in a separate account, but reconcile it with an actual 2026 tax projection. Repeat the review on a regular allocation date using cleared deposits rather than unpaid invoices.

Disclaimer: This calculator is informational only, is not affiliated with Mike Michalowicz or Profit First Professionals, and is not tax, legal, accounting, or financial advice.