I’m sure you’ve read or at least heard of the “Profit First” book by Mike Michalowicz. It’s a game-changing philosophy on how to manage the accounting in your business to ensure a profit month in & month out.

In this training, Michael Tasner will unpack how to implement the Profit First methodology for your agency to ensure you make a profit in your agency & pay yourself first from here on out.

About Michael:
Michael is the owner of No Joke Marketing (a Seven Figure Digital Marketing Agency) and a Profit First Certified Consultant.

Connect with Michael Tasner

Connect with Josh Nelson

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Alright, well thank you for joining us on today’s session the profit first agency with Michael Tasker, I’m super excited to one practice in more depth on this is really based on the the book called profit first by Michael McCallum it’s, I think it’s one of the best books on accounting that’s come, you know, come out in the last 20 years, and it really kind of flips, revenue and profitability on its head. I read the book years ago, I sat through a live session with Mike McCallum was explaining it to me, and I didn’t really get it until the last time I saw him about six months ago at an event. Again, I just told it again and explain it again. And I was like, Yes, like this is critical that if you can start to look at your accounting like this, where you put profit first, and it’s baked into every dollar that you make within your business, um, everything works better, right? You get you’re able to make more money, you’re able to be happier, you’re able to really keep your motivation and inspiration going with

Your business. And so, you know, I was like, man, I got to teach the seven figure agency members about this concept and really get them to implement that in their business. Because if you can make more money and be more profitable, you’re going to land you’re going to be happier. But you know, as someone who has just read the book and implemented it myself, I really wanted to make sure I found someone that owned the concept that is going deep with it. And so Michael Tasker has been a member of seven figure agency for how long has it been now Michael, probably going on three years. Yeah, I believe we’re going on your three, year three, grown to seven figures over the last couple years for the second time in his business. And he’s going deep on this concept. He’s actually a profit first certified consultant. And so I was like, Who better to bring on and kind of teach this concept than him So Michael, thanks so much for agreeing to come on and kind of unpack your your learnings with.

So before I dive in, like anytime I have a guest I like to really think through and make sure that I’m solving a specific problem.

within your agency and something that’s really kind of mission critical. And what I find with most digital marketing agencies, myself included, is that we have a tendency to focus on the top line. Instead of profit. We think about all how much revenue how much recurring revenue, how much money did our agency make, right? Our agency did four and a half million dollars. And it’s like, Okay, great. And when you focus on the top line, it’s exciting. But at the end of the day, are you more interested in having a sexy number? Are you more interested in having actual money that you keep, right, the actual profit that you get to put into your own bank account or invest in things for yourself? I love to hear from you guys and comments. What’s more important revenue or the amount of money that you get? Right? And the reality is

the profit is really what matter for it revenue revenue is vanity. Profit is sanity. Right? So we wanted really, really you won’t lose this cash. My prop my pocket crew says profit Absolutely.

The tendency that a lot of us get into is to constantly think and then we think rightfully, we should be reinvesting in the business, right? We’re going to go out, we’re going to land clients. And in order to grow, we have to invest in marketing, we have to invest in team, we have to invest in systems, we should be investing in our training, right? And we think that we’re doing the right thing by constantly ploughing back the revenues and the proceeds from the business in to growth, right? We did this ourselves for years, it was like, okay, we get to a certain level. Now we’re gonna go hire some people. And we you know, you make a choice with every dollar that you make. Are you going to keep it right for yourself and pay yourself what you need to get paid? Are you going to reinvest it? Then what often happens is if you get into this habit of constantly reinvesting into the business, um, you’ll get to pay yourself and eventually that burns you out. Right? And have you ever experienced this Michael, where like, you were just reinvesting in the business over and over and over and over, thinking eventually

Going to get to pay yourself profit. And it really just demoralises. You.

Definitely. Yeah. I mean, that’s one of the biggest problems I see agency owners facing. And especially when you’re just starting out and you’re like, well, someday, someday we’ll get there. Someday we’ll get there. And then obviously, that then spirals and affects other areas of your life. So even if you’re not making profit in your mind, a lot of you have messaged me in the last week or so just after seeing the topic and you’re like, well, I’m the main breadwinner, or whether you’re a male or female. And

I take a step back and feminine if you were if you’re the main breadwinner, and you’re not putting profit first, you’re really in trouble. I mean, if you’re pulling money back, I mean, how can you pay your bills and it’s, that’s when stuff really starts to go south. So, no doubt, no doubt. And so the other thing I see happen often when it comes to into our agencies, and this this is kind of rapid in the industry is is flying blind and not knowing where the money

went right where, you know, it’s just, you invest in a tool, you invest in a person, you hire someone on up work on generating money, but you have no idea where the money went. And if you don’t know where the money went, it’s gone. Right? It went into the ether. And so really, if you can’t get these things under control within your business, if you’ve got the wrong mindset around your money, and how much money you should keep within profit, if you’ve got a mindset that you should just constantly be reinvesting in the business, instead of paying yourself and keeping a healthy profit, and you can’t get your financials under control, you’re going to wind up doing a lot of work with very little to show for it like you won’t be able to pay yourself directly. and the value of your business at the end of the day is often based on the profit that you retain within the business. And so there really is a very exciting opportunity. Because, you know, if you can get this under control, and you absolutely can just by changing the way you think and putting some tools in place, which Michael’s going to share with you on today’s session.

Really, you can focus on your profit first and make that the priority within your business. You can take control of your finances. And it doesn’t have to be as hard as you think, in terms of budgeting, just by changing the way you structure your bank accounts, change the way that your money flows within your operation, you can kind of hack this whole process of making profit on a consistent basis, which really is what’s going to help you build wealth and grow your bank account, month after month, week after week, year after year. And ultimately, you can really have profit from this day out within the business. I think Michael is going to give you a very clear plan to make sure that you make a profit next month, the month after that and from there on forward. So if you’re excited about that, posting comments and let me know you’re excited about having a profit and knowing that you can control with going to profit from now on. I want to get a thumbs up in the Facebook group or give me a yes. Okay. I’m getting a bunch of yeses coming in. So for

Here, Mike, I’m going to hand it off to your stop sharing my screen. And now you should be able to share your screen.

There we go.


Alright, can everyone see the screen? Alright, so move, Josh is headed to my other screen here.

Alright, so I want to start with the challenge and

throw this out there. So respond on the chat, but let’s play real quick game. So let’s say that you just launched your agency


for the first 30 days, you brought in $1,000. Okay, so thousand dollars top line, type in the chat. Give me the breakdown of where did that thousand dollars go? So I’m going to give you a minute or two. But where did that

thousand bucks go How did it get spent? So I’m going to monitor on my, my other screen here and just kind of watch for the chat spring over here.

I like that kinda, I would have lost 47 K.

That’s not good.

So, again, let’s just

play with that a little bit thousand dollars, what is what is the breakdown look like?

So I’m just going to again give everyone a second so and this is

just a hypothetical.

So Don would have said he said 30% expenses rest of me Got it.

Anthony 50% pay 50%. I’m not sure where the other piece would go. Mark said payroll subscriptions Keith VA. marketing costs k got it. Anthony white area 50% of the people

white label, okay?

And it doesn’t matter if this is $1,000 for a website or $1,000 for paid traffic or SEO so that we’re just just brainstorming here.

Third ad spend third fulfilment third profit. Alright, so I like Joshua. So, what I didn’t hear on here. So a few of you. Look at the last start at $500 some contracted labour. That’s a little bit more than that 1000 but $800 VA $200 for you the best answer on here, and I apologise I don’t make sure and I don’t want to butcher your name. I believe it’s Isidore.

So 10% taxes 20% profit 50% expenses, 20% slush, so you are the closest. So what I when I tend to throw this exercise out, and I’ll give you again, my backstory in just a second but I like to start with this. Rarely do I ever hear taxes


Or owners pay. So it traditionally is if I had $1,000, maybe I’d take 100 bucks $200. But usually it’s all of the other stuff that, well, I’m gonna have to pay a VA, I’m gonna have to hire a designer, I’m going to have to all the overhead, whatever it is, that tends to be what I hear first. Only one person out of every single one of you mentioned taxes, which is

among my least favourite areas to put money, but I will give you some tactics and some tips on here to try and minimise some of that stuff as well. But that’s not necessarily the focus. So we’re going to go over three key things. So what is this whole pay yourself first methodology?

why most of you are currently doing this exact thing and this is how I used to do with my first agency bank balancing. So you log in you look at your bank account, is there money there? Yes or no? And that’s how you make your decisions. What do you

actually do from here. Like, what how do you take this? How do you implement it? etc. So

a few stats, and I don’t like to be the Grim Reaper, and I don’t want to necessarily tell you things that you already know. But when I look at the stats of small business failure,

most of you know the stats are I mean, completely grim. So we’ve got, I mean, 34 people that are on this slide, I’m sure more people that are listening, I’m sure there’ll be a few hundred people, if not more that re Listen to this. 50% of you are going to be out of business traditionally, within the first year, just laboured.

Most small businesses do not succeed. Now, if you get past year two or three. Those rates then start to change a little bit. But what what’s interesting when I really started looking into it, because there’s, there’s all these stats and I mean, we’re all marketers on this call so mean a lot of us invent stats

On the flyer, Joe Yeah.

X percent and Nadia, Facebook is going to drive yet 19.4% of your traffic or your revenue, and we were great at making up stats on the fly. And there are tonnes and tonnes of stats of what’s the Small Business failure or success rate. Every single number is very, very grim. But the number that I was completely shocked by was of the 50% of businesses that then actually stay in business. Only 40% of those businesses actually turn a profit 40% turn a profit 30% breakeven, the other 30% are losing money. So even if you pass this rate, and you’re actually among the staff, so if any of you have been in business for more than a year, and you’ve made a little bit of profit, I commend you, you’re in in the green. But the stats are just so darn grim and it really kind of ties into

of my storey. So, this is my second agency, as Josh said, so I launched an agency when I was 15. And that was my first agency, and I was able to grow it to seven figures.

But candidly, I did every single thing wrong. So not only all the stuff that Josh teaches and the methodology of having a niche and everything else, I did all wrong. I had, give or take 50 clients at

$2,000 a month, give or take, I’m rounding some simple math and they were

some are $500 or 10,000. And they’re all they’re all different numbers. 40 plus different niches. And I ended up running out of cash. And everyone’s like, How the hell did you I mean, doing 100 k hundred and someone’s 150 someone’s at the the numbers are all over the place.

But a couple things happened before it literally ran me into the ground. And that combined with the money stuff almost put me in my grave like I literally would be lying in bed staring at the ceiling wondering how the heck am I going to make payroll? Can I put it on my Amex again? Can I ask the people to delay payroll? The my Amex bill was mounting and I just couldn’t figure out for the life of me How the heck to manage my cash. And it wasn’t just about managing it, but it was what I would do was literally log into my business bank account. And I would look at the top line number. Okay, great. There’s 140 grand in the account. That looks awesome. I believe that my expenses for the next month are like 80. So they’re 60 grand. That’s essentially I could take for myself if I wanted. So then what I started doing was taking more money for myself, so I take an extra five grand and

10 grand here on top of my salary, so I started taking random distributions, because I thought just in looking at that high number that there was plenty of cash. But as the numbers then continued to grow so as my revenue went from 30 grand a month to 50 to 80 to 100, etc, then I continued to spend more. So now I need to upgrade x and I can hire an admin assistant and a fancier bookkeeper and a nicer office and like there was never enough and that ultimately led to the demise. I probably could have survived had I laid off a lot more people and kind of rebuilt it. But the whole financial piece combined with my energy just crushed me like it literally crushed me to the ground, working at 100 hour weeks, no family life, so I so ended up selling the agency because I was not highly profitable.

Even though a top line was a million dollars plus I ended up walking away with the sun, essentially a year salary.

So, and not an amazing salary as well. So an agency’s traditionally sell for a lot higher valuation than that. But when they’re analysing it when I was analysed, and I’m like, jeez, I wouldn’t even buy my own agency. Like I there’s cash, literally falling out the windows. So sold that agency. And I started up no joke marketing after my non compete expired. And I vowed for this agency to do things differently. And that’s why I joined the seven figure agency. That’s why I’m putting other things in place, but one of those things was profit first. And I took it a step further and selfishly speaking, I actually became a profit first consultant, just to help my business so that I knew this stuff inside and out. And after talking to Josh, he’s like

Why don’t you come and do a presentation and if there’s some ways you can help some of the agencies continue to grow and help with their profits, more power to you. So I decided to kind of help not only train and teach and see if there’s some ways that I can help you further. So that’s kind of the backstory. So

when I look at kind of the top level, and I was I love analogies, so

I’m not the most fit person in the world. But it’s all based on kind of having a healthy lifestyle very quickly translates to having a healthy business. So we’re going to talk about kind of some analogies between the two and being physically fit is very, very similar to being financially fit. We’re going to look at small plates, we’re going to focus on the veggies First, we’re going to remove temptation. So like taking the ice cream in the cookies, and we’re going to have a system where it’s essentially

autopilot so that you’re not going back to the temptation, and doing what most of us do. And I’m sure if I were to announce, ask the question and feel free to say yes or no on the chat. But

how many of you are going in and then you’re transferring extra money from the bank that let’s say you were paying yourself, quote, unquote, five grand a month, how many of you at random or as needed, then go into your business bank account, and hit transfer to your personal account or cut yourself a check on a random basis? So I’d love to hear from just simply a yes or no on on the little chat there.

Never have Well, that’s good.


I used to do it as well. So

I would challenge most of us that you’re going to go in there and you’re gonna grab something extra. So

step one, small plates

It’s all about portion control. So we want to have instead of having this one overarching account, so to speak, where all of your money is sitting, we’re going to start to look at this, like you’re going to have a couple of small plates. And I’m going to show you how you’re going to shift your money around how often you’re going to do it. I’ll give you some numbers to work with. But it’s all about moving from having one large plate

to having lots of little plates. Sit the wrong button. Sorry. Is anyone familiar with Parkinson’s Law? I actually wasn’t until I started studying profit first, but

anyone familiar with Parkinson’s Law.

It’s not a marketing term.

Not seeing not seeing any yeses. So

I didn’t know what this was. But after I learned about the law, it made complete sense. So Parkinson’s Law essentially says that whatever is in front of you, you’re going to use. So I got a graphic of a toothbrush. So if you put a small amount of toothpaste on your toothbrush, you’re going to use the small amount. If you have a huge gob of toothpaste, like the graphic you’re looking at here, traditionally, you’re not going to push it off and use a smaller amount, you’re going to use what’s in front of you. So a lot of us as agency owners, I’ll give you an analogy to what agency owner is.

Let’s say that you give somebody a rough quote of $10,000 to do a new website. Chances are that if that’s the quote you gave, even if it comes in closer to five K, your seven K, you’re going to make sure that that quote of 10 k

You use the resources up for that 10 K. That’s not just because of you wanting to extract the most value, but it’s Parkinson’s Law. If you have three months to do a task, chances are you’re going to get it done right before the three month mark, you’re rarely going to have that done within a week or a month or something like that. So when I started thinking about Parkinson’s Law in my business, if I had $100,000 in revenue, that hundred thousand dollars regardless of if that was good or not, was going to get eaten up. So if I have them level now we can go by someone on my team way back when had the idea that we can attract more clients by having the best cup of coffee in Buffalo? And I’m like, All right, great. So you went and bought like some $4,000 coffee machine, all these fancy beans, and I will take that when I stopped to think that’s what was like.

We even had a client in our office, I think we had a client like one time in two years. So we didn’t even service Buffalo, New York, even though we live here, all of our business was at state and it’s this whole Parkinson’s Law. Well, I had the money there. So I thought that I could just eat it up and use it. So that’s why when we go through this, we have to eliminate those temptations and take the behaviour is completely behaviour based in order to change this stuff. So here’s the whole small plates, methodology. So the first plate I like to call it

complete, and this income plate, you can call it

the serving tray. So this is where all the food is kind of coming. This is where everything is going to initially go in and

This is traditionally

where most of us traditionally keep everything. So you traditionally have everything at your servant, right? Everything goes in income, and then everything comes out of income. So what we’re going to do here

is you’re actually going to end up with anywhere between six and I actually have 12 different bank accounts. And the first one, my favourite is the income bank account.

And all of your money is going to go there first. So all of your checks all of your, if anyone’s ever paying you cash, all of your credit card payments, everything is going to go into the income bank account first. So most of you already have at least one bank account possibly a second. So you don’t necessarily

Have to then replicate the income you can leave that one is income.

The next step though, and I’ll come back to this, and we’ll keep talking more about it

is whether it’s your bank, I actually prefer credit unions, I found that they’re a lot more friendly to profit first. Because this instance, can you hear me okay, Josh? Yes. All right. Josh Wheeler said did Mike freeze up for anyone else? Am I still? Everything’s still working all right for everyone. Fine. I’m having you flying. So just keep going. All right, thank you. Sorry, Josh must be in your site, Josh Wheeler. So the other accounts you’re going to open is a profit account. And owners pay account, tax account and operating expenses.

So these are traditionally the main accounts that you’re going to start with


This can expand, but it cannot subtract. And what I mean by that is, these are the bare minimum


that you want to look at

income profit owners pay tax op expense. And on the next slide I’m going to, it’ll make a little bit more sense. But what we’re going to do here is everything is going to flow into your income account.

And I’d like to keep the math simple. So let’s say you’ve got $10,000 a month of income.

Then what we’re going to do is we’re going to set up predetermine percentages,

where the income account is then going to get distributed twice a month.

I’ll talk about what days because there’s a scientific formula behind everything. And I tried all different things as an agency owner to break the system to retool it, but I started off about two and a half years.

years ago with this exact system of accounts. And then I’ve started opening up additional ones. Now you might be saying, well, where Where’s the other bank account that he’s talking about? I’ll show you that in a second. Because we’re actually going to move money around to really solve your whole temptation. So again, I popped in for a sec, with. So this concept to me when I first heard it, I got it in principle, but I was like almost creating all these extra accounts. I don’t really see at the end of the day, how that’s going to change anything. And it was until I really got this idea of Parkinson’s Law is that if you’ve got all of your money sitting in that income account, and you’re paying your expenses out of the income account, by that by the nature of that law, you’re going to spend it all and by taking it out into the separate accounts right off of the bat. That’s how you can carve out your profit carve out your tax and your owner pay. I just wanted to make sure that was clear to everybody that you know, it’s not just creating extraordinary

reason you create these accounts is because it makes it so that you force yourself to be more efficient with the money that you have. Exactly. I mean, it’s the system at a high level is similar to this whole concept of pay yourself first. But I would similar to what I did earlier, I would challenge most of you that are on the line to see you actually pay yourself first very few of us actually do your money comes in, and then everything is instantly going out. You’re paying your mortgage, you’re paying your kids daycare, you’re paying for your internet yourself, all of that stuff goes out. And then if there’s anything left over, we’re literally completely reversing the entire methodology of this whole notion of money comes in. So income comes in all of your expenses equals what’s left over your profit. The whole piece of this is we’ve got to make sure that the owner is taken care of first

And that is really a couple of you have paying me single, I haven’t been taking any pay I haven’t I, this business while we’re all here to serve,

there’s no point for you to stay in business. If the business is not serving you. Every one of our businesses needs to be serving us first. And if we don’t put these things in, but I tried not putting these bank accounts in place, and I tried just

changing the way that I was doing my billing and invoicing and I tried everything to actually not do this. This is the only way that I had been able to completely retool my finances, and that’s when I went all in with profit first. So this next slide, and I’ll appreciate the clarification. Josh, you said it, I was just restated. So again, you’re fine. So the income comes in, and then we’re going to have these different bank accounts that are then going to move the money based on certain percentages and that’s the next slide I’m going to show you so you’re going to

Have this income account, all the money is going to go in there and it’s going to sit in there until two times a month, then what you’re going to do is based on percentages, you’re going to move money to profit, you’re going to move money to the owners pay, you’re going to move money to your tax account out of every agency that I’ve analysed their financials.

This is the one account that rarely any of you put any money in,

sadly, and I, I’d be lying to if I wasn’t the same way. So up until I started doing profit first, I was hoping that I could at the end of the year or in January, I could get a client to prepay for the whole year. And for two years in a row, I was able to do that. So I don’t know like a 20 or $30,000 accounts I would get that money in and Okay, great. Hopefully that was enough to cover my tax bill. I never set any money aside for taxes. And that unfortunately gets a lot of us into some challenges as all sudden there’s nothing

leftover for Uncle Sam. So this next slide

is all about small plates and I I’m going to make it a little bit larger on on this next screen because I know that uncle scam I like that one.

So I wanted to blow this up a little bit. So I know it’s a lot of percentages, but let me talk you through this. So if you’re in basket a

and let’s say again, for simple math, let’s say that your your revenue is

$10,000 a month so $120,000 a year top line revenue. Okay.

The percentages and these are all ideal percentages that I designed based on where I’d like to see agencies go.

So I’ve taken all the profit first stuff and then kind of morphed it to fit agencies if you’re anywhere below

250 K and revenue.

These are the percentages that I’m suggesting.

So let’s stick with 120 K a year, $10,000 a month. So, owners pay should be at 60,005% of that would be profit 15% you’d be putting aside for taxes, and 30% would be for op x. Now,

depending on how your agency is operating currently,

these numbers could be completely out of whack. Usually they are

or they could be close to spot on. Again, most of you, if you’re bringing in 10 k a month, you’re typically not putting aside 1500 dollars a month for taxes. You’re also very rarely have I seen any agency owner. That’s the whole

concept of profit first. I have seen very few if any agency owners ever take profits

other than at the end of the year, and I’m not talking distributions. I’m talking profit. And you might say that that’s Michael that that number

is really tiny. If I’m bringing in

$10,000 a month for exam, that’s not a big number. However,

it’s this whole habitual piece of, I want you taking your profit first, and your owners pay before these other accounts get funded.

Now, this often can set people into a panic for one of a couple of reasons.

Excuse me. So one reason is that traditionally with agencies if you’re doing under 200 K, usually I see

Owners pay

often 6070, even 80%. And you might push back to me and say, well, Michael, what, what’s wrong with that?

The challenge with that is that you have no way to them scale. If you’re having to do all the work, the only way that you’re able to be taking that kind of owners pay is if you have insane margins, where you’re having to do the lion’s share of the work, you’re also then traditionally not putting money aside for taxes. And if you’re taking 80% is going to your pay.

That 15% number is going to be massively understated. So if you were paying yourself nine k out of 10 k a month, for example, and let’s just say you didn’t have any operating expenses, you were doing all the work, everything $1,000 it’s not gonna be

enough to cover your tax account because you’re going to be having to pay tax on that full $9,000. So I’m not sure able to come up with all these other

surprise, tax breaks and right off your car and your third unborn and all these other things, you’re going to have a tax liability you didn’t plan for. So the goal in looking at these numbers as as your business scales, so then as you move to the 250 to 500 K, you’ll notice that the profit number goes up.

The owners pay number comes down and traditionally as your business gets in this range, usually the number that you’re going to be operating around in terms of op expenses around 40%. But again, the piece that I want to repeat is that

these two right here,

out of everything on this sheet and yes taxes important. The first thing when we do these

mentor movements twice a month

is you’re going to move to the profit account first. The owners pay account second.


again, a lot of you might be thinking, well,

this is fine and dandy but my expenses are 60%. I’m taking 40%. So at the end, I’ll tell you about one real simple way that I can help you. And it’s really putting a plan to start to get to these numbers. It took me about a year to get to the point where I was able to take the owners pay that I had wanted.

It also took me about six months before I could get my profit up to 15%.

So I initially started off at 1% and that I continue to taper it so it will take time to get you to

These levels, but it’s a complete mindset shift of I need you taking your profit out of the top first, your owners pay,

putting some money aside for Uncle Sam.

And if there’s not enough left for expenses, well then we need to work together to find out why your expenses are kicking your butt. Because that’s the other thing I either I see owners pay is exceptionally high

because you’re doing all the work, which again is not a terrible thing as long as you are putting money aside for taxes an appropriate amount. And if you only want to be an agency that’s doing a couple hundred thousand dollars a year, and maximising your pay, that’s completely fine.

But you still have to make sure that that tax number gets adjusted.

But the OP X number of that tends to be the one that if I don’t see really high revenue, or excuse me, really high owners pay

I see really high operating expenses because all of us are addicted to Xyz tool. And now we want to, we have an I have a to we have the shiny object object syndrome where we’re literally buying every new tool and all this training is out and that training and well, we gotta go buy this now and I need the latest mac book. And if you’re not budgeting for those things, I’ve seen op expenses where they’re 70% of your business. Now they can continue to rise as your business

gets larger.

But it’s again, these these numbers can be kind of noodle around a little bit. I’ve seen a lot of agencies what even as they they crossed the million dollar mark. The owners pay is 20% there at the 15% tax number, but their operating expenses are still at 40%

It varies based on the different agencies. I run a virtual agency. So Josh has an office, but I know Josh, you run pretty lean as well, and highly profitable as well as great compensation for you and your partner. So it varies based on the agency. But these are numbers to give you something to at least plan for. So the whole veggie analogy,

eat veggies first profit owners pay. So when that $10,000 comes in, for example, you’re going to move 5% to that one new bank account that you had set up, labelled profit, and then you’re going to move your own risk pay. Those are the two that I’m most concerned by. So all of your deposits are going to flow into income.

And then what you’re going to do then is you’re going to move based on percentages.

You’re going to move x percentage to profit x percentage to owners pay x percentage to tax x percentage to off expense. Now I showed you the recommended percentages, but there’s never been a time when anyone can just come in and just start doing the recommended stuff ever. I it took as I said, it took me six months to get the the Prophet peace and a year and a half to get the owners paid to where I needed it.

So it takes time. But it’s the even if you start off taking 1% of profit, it’s the act of your money falling into the income account so you can very easily see your top line.

And then you’re then going to flow twice a month

into the proper accounts. So it’s this whole piece of sales

minus expenses does not equal profit, this whole Frankenstein formula that you were kind of trapped and looking at. It’s this whole bank balance accounting issue of, well, I’m just logging in and looking in and seeing what are the bank balances, you have to get in the flow of removing the temptations,

removing the traps, so that it’s your sales minus your profit equals expenses. $10,000 comes in $500 moved to your profit account, that isn’t what’s left over your then taking your profit First, the businesses serving you as the owner, rather than everything else getting eaten up. It’s the behaviour piece.

And I know I’ll answer your question in just a minute. It’s the behaviour and it’s not this isn’t logical and as Josh said it took in some time to to get it once I started it.

Everything really started flowing. And I got out of this hole. Okay, $10,000 minus expenses equal whatever is left over is what I get to completely reverse engineering. Now the other piece that I will tell you that I did not do initially was I didn’t remove the temptation. Like I, my wife, I’ve got the worst sweet addiction and that’s why I’m not as healthy as I should be, like addicted to sweets. So I told you earlier of you need your income account your profit, operating expenses, taxes, etc.

The downside is if you do not then remove the temptation, you’re going to do what I promise you that all of you have done


you’re not going to do this. So this is probably I mean, there’s a lot of great slides on here, but I needed to then take it a step further. So I set up five accounts at one

Credit Union.

I got I actually have 12. But I’m not going to get into all the advanced stuff. So I have other accounts were actually move payroll into another account, I have another account for subscriptions. So I, I took this to the nth degree. But what I found was, if you keep everything at one credit union or everything at one bank, five accounts, I promise you, what you’re going to do is you’re going to move money. So you’re going to log in at random, and you’re going to say, Well, shit, I need to, I gotta move.

I gotta move some money to my pay now, or there’s some money in the profit account, but I want to go buy XYZ tool. So you’re going to move that into your operating expenses, or there’s $10,000 in your tax account. Now, I don’t think our taxes are going to be that high this year. You’re going to move that. So what I had to do and what I’m highly recommending you do is

Go to a completely separate bank that you cannot go to physically.

It’s got to be hard to do.

And here’s what I want you to do. So again, your money flows in here.

You’re then going to move your percentages.

And then the second step

is you’re going to and I have this setup to be automated, any money that comes in the Prophet account,

on the day that I transfer, it is instantly swiped to another bank account. Instantly sweet. The same thing with the tax account. And I promise you that if you leave your tax money in one of these main bank accounts, you will either the tax money even if you put it aside, you’re going to find you’re going to think that it’s yours. You’re going to move it back into owners pay you’re going to move it into profit, you’re going to find something to buy but one

I found that when I sweep it to a second bank,

I’ve completely forgot

how much money I even have in the tax account. So the tax account continues to build, it’s another bank, you can collect interest on it. But you don’t use that for anything else. You’re not investing it or buying Bitcoin or anything like that it’s moving into to a safe account on autopilot. So the other piece to this is the frequency. So everything or how often do do I need to do this. So you’re going to do two different things. So you’re going to do this one here.

So you’re going to do

I’ll do the quarterly one first.

So quarterly, usually I like to do the top 10 and 25. But I’ll tell you the quarterly piece first. So as you’re moving your money

Twice a month, and I’ll tell you the exact dates to do them. If you didn’t already see the slide,

you’re going to move the money twice a month, quarterly, you’re going to do a couple things, you’re going to pay your tax estimates, which that took me years and years to do, I always would pay my taxes at the not even the end of the year, I would pay them after I limit my tax liability was so I was paying

after the fact then paying interest and things like that, so you’re going to pay your tax estimate. The second piece is that every penny in profit is going to go to you. You’re going to cut yourself a check and you’re going to do something fun with it. The biggest rule out of all this with the profit first mentality, you cannot pour a penny of that money back into the business as Josh mentioned earlier, your profit is not meant to go back into business. So personally speaking, I was in Toronto last week.

And my quarterly profit payment paid for the entire trip.

So I took that and so are the quarterly payments are for fun things, they’re not for you to go buy a new iPad or something for the business. So you to hire a graphic designer to reduce something. They are for fun stuff, vacations, things being done around the house. Again, they they have to be something that has absolutely nothing to do with your business. Now, some people have challenged me and said, well, Michael, I mean, what if it’s a new computer, we’re all using our laptops on a daily basis, I would challenge you to not be buying a computer or anything work related. So that’s the quarterly you’re going to pay your tax payment, you’re then going to take your profit. So that money was already in a separate bank account, collecting a little bit of interest. The third thing you’re going to do is you’re going to a job

The numbers based on how things are going. So do you need to adjust your profit number do you want to take the profit number from 5% to 6%, or from 1% to 2%. So you’re going to quarterly adjust the numbers based on how things are going at the business. Now, when I’m saying adjust, I’m not saying that you should be adjusting anything negatively. So going back to the slide, I don’t want to see you, if you started off with taking 5%

you should not be going the other way back. You shouldn’t be well the next quarter, we didn’t really do as well. So I’m going to take 4%

your profit and your owners patient not be getting adjusted down. They should be getting adjusted up in accordance with these particular stats as a guideline. You can adjust this number I adjust slightly depending on my profitability. So if I find that my expenses were a little bit higher, I might have

adjust my tax percentage to 12% or 10%.

But I typically keep a consistent 15. I might adjust my operating expenses to 28 and then bump two more percent to go to profit. And then you get right back in the rhythm of your money comes in. And then you’re transferring and allocating all based on the percentages. And you’re going to do this twice a month. And you’re going to do it on the 10th

and the 25th.

And you might well, what, what’s the secret sauce behind that they, Mike McCallum and the team at profit first, they tried all different kinds of days and studies. These are the two best days to do it. So all of your income stays in your income account until the 10th.

You move based on those percentages on the 10th. So your income should go to zero.

And then all the income that comes in from the old

Through the 25th, you’re then going to move those numbers accordingly thereafter. So you’re going to make those transfers twice a month 10th in the 25th. So $10,000, let’s say you got five grand, that’s sitting in the account by the 10th, you’re going to then transfer that five grand to the percentages. So if you’re doing 10 5% profit, you’re going to do two and a half, two and a half.

Does that make sense?


Yeah, there’s a lot of questions here. So we ended up interrupting read these questions off and then we can keep we can keep going, Scott Andreessen, what’s up man, he saying, Can you please give recommendations of credit unions or banks for use reach types of these accounts, profit, tax, etc, that you recommend?

Got it. So let me do this. Let me there’s something two or three more slides. Let me finish

The slides and then I’ll crank through the questions if that works. Okay, perfect.

I usually get a question around debt.

So and a couple of people have asked how do you handle like retirement accounts, things like that. So I also use profit first in my personal accounts. So same thing so my owners pay then gets distributed

accordingly so that I’m moving a portion of my owners pay.

And I’m putting money aside for investing. I do the same thing with my owners pay. I call it a slush fund instead of profit. I’m still getting the profit money, but I will pull a small percentage of my owners pay as well.

But when you’ll have other accounts, that’s if you’re typically then having to factor in that the key with dead ends. We’re looking to freeze it. So if you’re like, Michael, these percentages look great, but I got 70 K and an Amex

Gotta work that down, then we just need to look at the numbers and start to adjust accordingly. So we might have to lower the profit a little bit. Look at are there some ways to cut back and op x.

There’s lots of different ways to look at it.

But the debt piece, it’s not, you’re going to instantly eliminate it doing profit, first of all start to eliminate your debt. But the biggest piece with this is we have to freeze it. So if you’ve got 70 k in debt, we need to start coming up with a plan so that that 70 K is going to go to 68. There has to be a plan in place and we cannot buy the locations.

We’re going to have to look at those and make sure that it very well might mean Well, we’ve got a crush your op expenses, and instead of it being 30%, it’s got to be 15 and 15 needs to go to your debt. And you might have to do more of the work and get rid of some of your freelancers or one of your team members pick up the slack to pay for the debt because you’re not going to get out of that debt. So lot of

Different ways to kind of slice that.

Obviously, this is the biggest piece. So I know this, it. Some people might think it sounds simple, some people might think it sounds complex. It works. I mean, I am taking more profit than I ever have been. I believe I’m up to 12%. My owners pay is substantial. I have money set aside for taxes, everything is is locked and loaded. The pieces you gotta stick with this, like you can’t just start it for a month and stop doing it.

So I like to

skip over that little slide. And with this storey, and then I’ll I’ll tell you about if there’s some ways that I can help you and then I’ll take as many questions as we have. So this is a real quick storey from a Russian sub, and I read about this. Lee was in the year 2000. And it was a Russian sub that went out for a mission. It was kind of a test mission. 118 people aboard and very, very real

rapidly, they started encountering issues. And rather than seeking help,

they sit down on our We’re fine. We’re going to get this stuff figured out. So they have the US they had Britain, they had a variety of other allies offering that literally was a US submarine that was somewhat nearby. Hey, we see that you’re having issues. Can we help? No, no, no, everything is good. Everything is great. And after three and a half, four days, they finally said, yeah, we need some help. But unfortunately, after three and a half, four days, 100 meeting people and bored and perished. And I don’t share that to be a morbid storey. But it’s more of those. I know a lot of you and I was in the same bucket. You might be like, Michael, I’m embarrassed by how much money I’m making or my debt. I’ve been there. We’ve all been there. I mean, I’m sure that Josh had a fair amount of debt when he got started. He wasn’t paying

himself the salary that he is now and taking these beautiful vacation with his family. We’ve all even if you’re I’ve seen agencies that are doing 3456 million the owners paying them themselves $50,000 and taking very little profit. I mean, we’ve all had certain circumstances and situations, but the key is getting some help. So I’ve got a small offer for seven figure agency people. And I’ll tell you what that is. And then again, I’ll happy to take any questions. So the first step is, and this is what I did in my business, I hired a profit first consultant before I became one. It’s a profit assessment. So essentially, with this assessment, it’s I want to phrase things like we do as marketers and benefits.

The biggest one at the bottom, it’s a clear plan to have more profit. So I’ll actually take a look at all of your books, all your numbers, and we’ve got some really intense and amazing software that allows me to plug everything in and then

Actually will spit back all the numbers. So where are you today? So of the percentages, where are you today, and there’s some methodical ways to doing this. And then what I’ll actually do is then put together a plan of, here’s your action plan a customised report of how to get to the ideal percentages. So if I’m saying you need to be at 50%, based on your books, I’m not just going to say, well, you need to stop spending money on X, I can very quickly start to give you a plan of for the next three months, here’s what you’re going to do, you’re going to adjust your percentages here. Here are some things that you want to tweak and change. So that’s the place that I always start with

have to do something from a marketing standpoint of

normally this and so rather than doing the whole triple axes and things like that. It’s 997. And I’m rather than having a big fancy funnel

making it very, very simple. I’m only going to take 10 agencies and I’m not using scarcity like a lot of us use I’ll really taking on one person in one location even though some of you do do that, but

so I obviously like you I’ve got a full time agency. I’ve launched a side business called no joke financials. Some a current agency is no joke marketing. The financial kind of outsourced CFO stuff is no joke financials. But I’d love to take on 10 agencies and help you so the step one is this profit assessment. Again, it’s a customised report of this is what you need to do to be more profitable. I’ll also give you a couple of tax tips and things like that have a shared one with Josh earlier before we started. That will save Josh in particular, probably at least three to five grand in taxes. But it will save every one of you at least $1,000 in taxes. So send me a direct message on Facebook Michael pastor say I want more profit, I’ll say

Confidentiality clause. So you know that I’m keeping everything confidential, because you are giving me your financials. It will take me about two weeks to put together the custom reports for you. So that’s my little mini sales pitch and not a hard clothes by any means. But obviously, I’d love to help you in some way that I can. And again, I am a certified profit first professionals. I’m not just an agency owner that’s like doing this half hybrid half half hazard Lee. I’m one of the hundred certified profit first consultants, I believe I’m the only one that’s only focusing at agencies. So

that’s what I have. So I know there were a variety of questions. happy to take any questions.

You want me to start at the top Josh human start at the bottom? Yeah, by all means, I mean, if you go ahead and you take them in the order you that makes most sense. I’ll start with Jay. I didn’t Jay I guess this is from Buffalo also. So I’ll have

To throw in some Bochy, pizza Tim will add got my Tim Hortons here I’ve got like four Tim Hortons cops on my desk from from the last two days. So

happy to throw something in for you.

Can this be done? We’re running the agency on a credit card?

That’s a good question. I mean, I

all have I mean, all of my income comes through by charging credit cards, all of my expenses go through on a credit card, I pay all my contractors on a credit card. But I’m paying my Amex bill from from the OP expense account. So it can be it as long as you’re not paying your credit card bills, they can’t be coming from the income account. That’s the whole point of if you’re, you’ve got that op x account for your various operating expenses, whether they’re freelancers or not, that’s going to be coming out of that affects account.

How are you paying daily

Weekly expenses between these these dates, so I’m not there. I mean, they’re expensive. Let me clarify. So I’m making the transfers twice a month. So I’m transferring money from my income account to op X to profit owners pay etc. And there are definitely our credit card charges that are coming in every single day of the month. But it’s I think that may be Jay, what was your your question of

you can pay expenses throughout the month

if they’re hitting a credit card, but you shouldn’t be cutting checks on the fifth of the month. You shouldn’t be cutting checks on the 19th. So if you’re paying your rent, for example, you should be paying your rent. All of you should move your money from income to op x on the 10th and then you’re cutting that check accordingly. If there are certain things that have to get paid

on certain days, I’ll let it hit a credit card. So all my monthly subscriptions and things like that, but I’m then paying twice a month. So I actually pay my credit card bills twice a month rate from my back so that it’s not then moving all the way to the end of the month as well. So I’m and I’m not paying the entire balance often paying from the previous balance, but I’ll pay 50% 50% accordingly.

Someone asked Where does retirement fund fall so

that can be a separate account. So that is one of the other accounts that I have up my 12 so we just opened up six or seven months ago a 401k for our team, and I added

another another location where I’m allocating to op x and allocating to company 401k my 401k so similar to profit, I have that actually coming out for

as well. So my 401k is getting funded before op x, everything that benefits me as the owner

is getting funded before everything else. Because that’s that whole, the Russian some example of will someday help is going to come your URL at the end of the year I’ll transfer whatever’s left over, it’s not going to happen. I’ve been there and I’ve done that. And you Well, if I got five, five K,

there were two or three years I didn’t contribute any night countable, you can save some taxes by putting money into a set. I’ll say, Well, I don’t really have any money left over. Because I should have been putting 500 bucks a month for example, for 12 months, and then figure out a way not to get it goes back to Parkinson’s Law. If the money’s there. Then I’m going to know I got six grand so maybe I’m going to go buy XYZ course. For example.

Someone asks so the expense actually becomes an expense budget. Then you pay all expenses and

So I, some people have it where

they are paying

all of their team from op x from an op x account. Again twice a month. I have another account where I’m moving percentages for payroll is what l so that my op x account is adjusted to be a little bit lower.

But it would, in simplicity, we don’t want to overcomplicate it too much in the beginning. You want to start off where you’ve got these accounts. And I do definitely recommend the outside accounts as well. So that you’re moving the profit money in the tax money so you’re not jumping back in that piggy bank

recommendations, credit unions and banks. So I always I personally

look for whatever the biggest credit union in the area is. So I’m in New York and FQ state employees Federal Credit Union, the biggest The reason that I like to look for the biggest credit union

is they tend to have the best business banking services.

The one off credit unions that have one location, they traditionally can’t rival

a huge bank. I personally am anti bank. So all of my stuff is with credit unions.

The fee like I don’t pay any fees on any of these 12 accounts. I collect interest, I collect rewards. There’s 00 fees, none.

So credit unions tend to be a lot more cost effective. And if you don’t have a big agency, it’s United $10 a month times five accounts times 12 months that starts to add up. I mean, that’s, that’s $50 I’d rather have in your pocket book that that’s profit rather than having to pay it to a bank.

See if there’s other questions here.

Mark lewis is asking how do you handle media spend

In terms of like Facebook ads and Google AdWords expense, assuming, I guess in marks case, he he builds the client the full amount and then spends from that for their spend. Sure. So I that That, to me is an op x. So I make sure that when I’m looking at what my read, that’s the whole way I had real revenue.

When I said the percentages are real revenue, you really can’t count. If they’re paying you 1500 dollars a month and $500 is going for ad spend. I’m only counting $1,000 as real revenue and that entire $500 I moved on FX. That’s another trap that I’ve seen agency owners fall and especially the ones that are getting the ad spend that you’re essentially banking and running your business off of the ad spend and kind of credit card arbitrage. And that’s how you get into those 70 k MX bills and then you’re paying 19% interest and so it’s we’ve got to remove the temptations. We got to

Remove that stuff instantly. Yeah, exactly. Scott saying all my all my expenses and income are linked to one account, right? So that’s that one big serving plate. So I’m giving my merchant account a new Megan account to start transferring recurring income, question work and keeping my current account as the OP x. So yes, set up a new income account or keep your main account is the income account and create a new op x expense account? Yes, so I kept my main account as my income. But if you want to keep it clean, the cleanest way to do that is to simply set up a new bank account. So if you’re running reports and things like that, the other reason I typically suggest a clean account is if you’re using online bill pay, it’s very easy to fall back in those old habits of just logging into your income account and doing billing you’re like Oh, geez, I forgot I shouldn’t have shouldn’t have paid XYZ from the income account. So

I personally kept

My main account is my income account. But what I’ve been advising people to do is a new account from scratch. That income account can be linked to your merchant for somebody link to all my automatic payments go there. And then any checks that I get everything goes to that one income account. When that again, the 10th and the 25th.

I swipe hundred percent of the money. So that’s the other key to this is that you’re not leaving anything. The income account goes from whatever is in there, it goes to zero.

Until the next day, more money comes in. Everything is getting filtered out. Scott, you definitely still need QuickBooks. So this is and there’s obviously some setup you need to do in QuickBooks for reconciliation and things like that. That’s definitely stuff that we can help you with as well.

Yeah, this you still need accounting software. And you can you can manage multiple accounts right within QuickBooks. It’s not a not a problem, but it will pull in and kind of match all of your transfers. Exactly. Definitely. Good, guys.

Still have QuickBooks and you still need to record your reconciliations. But the big thing here is again, your the whole piece of this is you’re taking your profit first year, you’re actually serving yourself before everything else gets eaten up. So

I know that we’re about eight minutes over time. But I really appreciate that everyone stuck in here. Thanks, Josh, so much for having me. Look forward to hearing from some of you hopefully, you felt this 10 slots pretty quickly. Just kind of my way to help and there’s some ways I can pay it forward to more than happy to do so. I thought I thought this was great. Michael, thank you so much for taking the time to share you know, whether you wind up hiring Michael or not right now you’ve got some good insights on how how profit first works. From a very tactical level, right? You set up these accounts, you transfer the accounts, and you make it part of your business operating system, right you choose to choose to take a profit as opposed to you know, thinking someday magically a profits go up here within your business. So I got a lot of

lot of notes from this, I appreciate you sharing. And I’ve gone through the prophet first book and I’ve sat through Michael McCallum version of it, if three or four times now so thank you very much for sharing your unique perspective on this and

Jays asking as part of your deal, do you help with the software setup as well? How we can, we can talk about that one offline, will at least at least move you in the right direction. If you need help with bookkeeping and things like that. That’s another conversation. But initially, it’s let’s get you to making more profit. Let’s get your Op Op expenses in control. Let’s start to lower your taxes, help you lay the foundation. And we can take it from there. So be sure to reach out tag, Michael, thank you for sharing his insights they can for sharing some of these cool, cool tactics on getting more profitable. And we will we will talk to you guys later. See you guys. Thanks, Michael.

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