Profit First Methodology: Balancing Percentages for Your Business
Wondering how to make Profit First work for your unique business? In this episode, I’m diving into how you can tailor the Profit First methodology to fit your UK-based business—no matter your industry or size.
I’ll walk you through setting Target Allocation Percentages (TAPs) that actually make sense for your business model, so you can build real financial health and sustainability. We’ll talk about why it’s important to avoid getting stuck in “analysis paralysis” and how taking action—however small—can move you forward.
You’ll hear practical examples of how different businesses, from retail shops to freelancers, can set up their TAPs and adapt the Profit First approach to suit their own needs. Plus, I’ll share real stories (like Aisha’s journey) to show how customising your allocations can lead to bigger profits and less stress.
Whether you’re just starting out or looking to improve your financial habits, this episode will give you the confidence and know-how to get started—so your business doesn’t just survive, but truly flourishes.
Takeaways:
- Learn how to set realistic Target Allocation Percentages (TAPs) for your business
- Discover why customising Profit First is key to long-term financial health
- Avoid analysis paralysis and start making positive changes today
- Get inspired by real-world examples from different industries
- Find out how starting Profit First early can set you up for lasting success
Links mentioned:
debhalladay.co.uk
financiallyhealthybusiness
Transcript
Welcome to Profit first with Deb Halliday.
Speaker A:That's me.
Speaker A:I'm Deb.
Speaker A:I'm a Profit first professional and trainer, author of how to build a financially healthy Business, founder of the Accounts Ladies, an award winning accountancy practice and the Accounts Office Training academy.
Speaker A:This is the show for business owners who want to stop stressing over money, keep more cash, pay themselves more and build a business that truly thrives.
Speaker A:Just a quick note, Profit first is a licensed methodology.
Speaker A:Everything here is designed to help you implement it in your own business.
Speaker A:If you're interested in helping others with Profit First, I'll share how you can apply to become certified too.
Speaker A:Let's get started because your business should work for you, not the other way around.
Speaker A:Welcome to Profit first with Deb Halliday.
Speaker A:I'm Deb Halliday, your UK Profit first professional.
Speaker A:And today we're diving into chapter four of Profit First.
Speaker A:Choose your own adventure.
Speaker A:This episode is about tailoring Profit first to your unique UK business.
Speaker A:Let's find your perfect path to profitability.
Speaker A:Chapter four is like those choose your own adventure books we loved as kids.
Speaker A:You get to decide how to implement Profit First.
Speaker A:But Mike Michalowicz warns, don't get stuck in analysis paralysis.
Speaker A:Some entrepreneurs obsess over perfect percentages and never start.
Speaker A:Others jump in too fast with unrealistic goals.
Speaker A:Today, we'll strike the balance, setting target allocation percentages, or TAPs that work for your UK business.
Speaker A:TAPs are the percentages you allocate to profit, owner's pay, tax and operating expenses.
Speaker A:The instant assessment from chapter three gave you a starting point, but chapter four digs deeper.
Speaker A:For example, a UK retail business with £500,000 real revenue might target 5% profit, 30% owner's pay, 20% tax and 45% operating expenses.
Speaker A:But a freelancer with £50,000 might aim for a 15% profit, 50% owner's pay, 20% Tax and 15% operating expenses because they have fewer overheads.
Speaker A:To set your taps, start with your industry.
Speaker A:Research public companies in your sector, say, divide their net income by revenue to find average profit margins.
Speaker A:Or ask Chat GPT for insights.
Speaker A:For UK specific tax rates, check HMRC's website or search UK tax rates.
Speaker A:If you're VAT registered, remove the 20% for VAT tax before the rest of the allocations.
Speaker A:It's not your money, you've just collected it for hmrc.
Speaker A:For owner's pay, calculate what you need to live comfortably, plus 25% for flexibility.
Speaker A:If I'm a new business with no revenue.
Speaker A:Brilliant question.
Speaker A: o build good habits even with: Speaker A:It's like planting a seed for future growth.
Speaker A:Let's meet Aisha, a Liverpool event planner.
Speaker A:Her business earned £120,000, but her instant assessment showed high expenses.
Speaker A:She researched UK event planning firms and set taps 5% profit, 50% owner's pay, 15% tax and 30% operating expenses.
Speaker A:Aisha avoided perfectionism by starting with 2% profit and adjusting quarterly.
Speaker A:Eighteen months later, she saved 5% profit and paid herself 50% life.
Speaker A:Changing your action step Set your taps Review your last three tax returns for your most profitable year and research your industry's profit margins.
Speaker A:Adjust your instant assessment with these numbers.
Speaker A:Download a TAPS guide from your website.
Speaker A:Next episode will cover Chapter five, Implementing Profit first from Day one.
Speaker A:Subscribe now and visit Financially Healthy Business.
Speaker A:Let's make Profit first work for you.
Speaker A:Thanks for tuning in to Profit first with Me, Deb Halliday.
Speaker A:If you found today's episode helpful, please subscribe, leave a review and share it with another business owner who needs to hear this.
Speaker A:For more resources, courses and to connect with me, head to debhalladay.co.ukuk and remember, when you put profit first, you build a business that reduces the stress while it supports your goals and dreams.
Speaker A:See you next time.
