How to Set Your Profit Percentages (and Why They Matter)
One of the most common questions we get when implementing the Profit First system is:
“How do I know how much to allocate for profit, owner’s pay, or taxes?”
The short answer: It depends on your business size, structure, and spending habits. The longer answer? You need a system that’s flexible, realistic, and rooted in your actual numbers — not someone else’s.
Let’s break down how to approach Profit First allocations, introduce the concept of TAPs (Target Allocation Percentages), and show you how to build habits that drive long-term profit.
What Are Profit First Allocations?
Profit First turns the traditional formula of “Sales – Expenses = Profit” upside down. Instead, it uses this:
Sales – Profit = Expenses
To make that work in the real world, you allocate a percentage of every dollar that comes in across different accounts:
Profit
Owner’s Pay
Taxes
Operating Expenses
These are your Current Allocation Percentages (CAPs) — what you’re using right now. They don’t have to be perfect. They just have to reflect where you’re starting.
Setting Your TAPs (Target Allocation Percentages)
Your Target Allocation Percentages are what you’re working toward. They act as guideposts that align with your business model, revenue range, and financial goals.
Let’s say you’re a solo service provider making $250K/year. Your TAPs might look like this:
Profit: 10%
Owner’s Pay: 50%
Taxes: 15%
Operating Expenses: 25%
But if you're running a growing team or carry heavy overhead, your TAPs will shift. That’s why this system works for both lean solopreneurs and multi-million dollar operations — it evolves with you.
Why Behavior-Based Planning Matters
Here’s where most DIYers get stuck: they try to copy someone else’s percentages and wonder why it doesn’t work. But the magic of Profit First isn’t just in the math — it’s in the mindset shift.
At Sum of All Numbers, we focus on the behavior behind the numbers:
How do you actually spend money?
What habits are helping or hurting cash flow?
What changes would feel doable — not drastic?
By starting with what’s real and building new financial habits over time, you gain traction without overwhelm.
How Often Should You Adjust Your Allocations?
We recommend reviewing and tweaking your allocations every quarter. At SOAN, our Fractional CFOs help clients track trends, test changes, and stay aligned with growth goals.
Even if you’re managing this solo, checking in every 90 days helps you spot red flags (like overspending or underpaying yourself) before they turn into bigger issues.
When DIY Isn’t Cutting It
Setting percentages is just one part of managing your cash flow — and it’s okay if you’re hitting a wall. If you're struggling to stick to your allocations or not sure where the money should go, it might be time for more personalized support.
Grab our free guide: Does My Company Need a Fractional CFO?
Inside, you’ll find key signs that your business is ready for strategic financial guidance — and what a Fractional CFO can actually do for you. It's a quick read that could save you months of second-guessing.