Profit First Instant Assessment

Audit your business expenses using Mike Michalowicz's Profit First assessment routine to calculate real revenue and spot overhead bloat.

5 time blocks, 45 minutes in total.

Time blocks

Gather Financial Records: 10 min
Pull profit and loss statements for the last twelve months
Calculate Real Revenue: 5 min
Subtract materials and subcontractor costs from top line revenue
Tally Actual Allocations: 10 min
Calculate current percentages for profit owner pay tax and opex
Compare to Target Allocations: 10 min
Benchmark your percentages against Profit First target brackets
Identify Expense Cuts: 10 min
Flag unnecessary operating expenses to bring opex down to target

About this routine

The Profit First assessment routine provides small business owners with a clear snapshot of their financial health. Designed by author Mike Michalowicz, this exercise strips away misleading top line revenue numbers to reveal how much money your business actually keeps. By evaluating real revenue rather than gross income, you get an honest look at operating expenses.

The assessment works by categorizing your current cash flow into four primary buckets: profit, owner pay, tax, and operating expenses. You calculate the percentage of real revenue currently going to each bucket. Comparing these figures against target allocation percentages shows exactly where your business is overspending.

Running this audit uncovers hidden overhead costs that drain cash reserves. Once you identify the gap between your current operating expenses and target percentages, you can systematically trim recurring bills, subscriptions, and vendor costs to align with profit goals.

Why this routine works

Uncovers your true real revenue after subbing out material costs
Highlights overspending in operating expenses relative to company size
Sets clear percentage targets for profit, owner pay, and taxes
Provides actionable expense cuts to improve cash flow immediately

FAQ

What is a Profit First assessment?

It is an audit created by Mike Michalowicz that calculates real revenue and compares current spend on profit, owner pay, tax, and operating expenses against target percentage benchmarks.

How do you calculate real revenue in Profit First?

Real revenue is calculated by taking total top line sales and subtracting the direct costs of materials and subcontractors used to deliver products or services.

How long does a Profit First assessment take?

A standard Profit First instant assessment takes about 45 minutes once financial statements for the past twelve months are gathered.

What are Target Allocation Percentages?

Target Allocation Percentages are ideal percentage ranges for profit, owner salary, taxes, and operating expenses based on a company's annual real revenue bracket.

Sources

Profit First by Mike Michalowicz, Portfolio / Penguin Random House