Profit First Allocation: 5% / 50% / 15% / 30%

What does this calculator answer?

You split one month of real revenue into Profit First target buckets—profit, owner's pay, tax, and operating expenses—using the published tier percentages for your annualized revenue. The four allocations always total your entered month.

It does not project your tax bill, treat unpaid invoices as cash, or tell you to jump from today's spending to the target operating-expense share in one transfer.

Is this a Profit First percentage calculator?

Yes. This page is the Numerandi Profit First allocation calculator. It splits one month of real revenue across profit, owner's pay, tax, and operating expenses.

Enter monthly real revenue available to allocate. Choose Service business, Agency, or Product business only to see which pass-through costs to remove first. Business model does not swap percentage tables. The headline is the profit allocation. Supporting lines show owner's pay, tax, and operating expenses.

Broader cash timing lives on the freelance cash flow hub.

What Profit First percentages should a freelancer use?

The published general TAP grid is organized by annual real revenue, not by job title. A TAP is a Target Allocation Percentage: the share of real revenue aimed at one account.

The table under the calculator result lists every tier this calculator uses. The percentages are the targets in Profit First, revised and expanded edition, by Mike Michalowicz (Profit First method). Relay's Profit First account guide reprints that grid. Under $250,000 the targets are 5% profit, 50% owner's pay, 15% tax, and 30% operating expenses. Higher annual real revenue uses another row in the table.

Those four percentages always add to 100%. Treat them as benchmarks for a gradual move, not as a one-month command.

What should you enter?

Use monthly real revenue available to allocate. Count cleared deposits after true pass-through costs. Do not count unpaid invoices, proposals, or gross sales that still include client-reimbursed costs.

Use business model to decide what to subtract before you type the month:

• Service business: enter revenue after subcontractor pass-through costs.
• Agency: enter revenue after client reimbursements and subcontractor pass-through costs.
• Product business: enter revenue after inventory and other cost-of-goods pass-through costs.

If you are a consultant with no subcontractors or materials, real revenue may equal collected revenue. Employees, ordinary software, rent, and your own overhead stay in operating expenses. They are not pass-through costs.

A trailing 12-month average is better than one unusually strong or weak month when revenue is seasonal.

How does the calculation work?

The calculator multiplies your monthly real revenue by 12 to pick a published revenue tier, then applies that tier's profit, owner's pay, tax, and operating-expense percentages to the monthly amount. Each displayed number also shows its formula under the result.

Upper boundaries stay in the lower tier. Exactly $250,000 annualized uses the under-$250,000 column. Any amount above $250,000 enters the next band. Published summaries sometimes show boundaries without saying where the exact dollar belongs. This convention makes the behavior clear and has negligible practical effect.

Business type does not swap tables. It only informs what you subtract before you enter revenue.

How does a worked 2026 example look?

The numbers below are the calculator's live defaults: $20,000.00 monthly real revenue and Service business. The 2026 date identifies this example. The percentages come from the published method table, not from a 2026 tax rate.

Annualized real revenue is $20,000.00 × 12 = $240,000.00. That amount is at or under the $250,000 tier maximum, so the published targets are 5% profit, 50% owner's pay, 15% tax, and 30% operating expenses.

You allocate $1,000.00 to profit, $10,000.00 to owner's pay, $3,000.00 to the tax account, and $6,000.00 to operating expenses. Those four formatted outputs are what the live calculator shows on first paint. They total the entered $20,000.00.

The 15% tax allocation is a cash target from the method. It is not a 2026 tax rate or proof that $3,000.00 covers your liability.

If you enter $25,000.00 of monthly real revenue, annualized revenue is $300,000.00. That amount uses the next published band: 10% profit, 35% owner's pay, 15% tax, and 40% operating expenses. The screen shows $2,500.00, $8,750.00, $3,750.00, and $10,000.00. Replace every dollar with your trailing-12-month facts.

What if current spending exceeds the operating-expense target?

Do not cut to the target in one transfer. Keep paying payroll and other committed bills. First write down your current allocation percentages from actual results. If operating expenses now consume 60% and your target is 30%, moving in one step can leave essential operations unfunded.

Act in this order:

1. Collect cash you already earned. An invoice is not an allocation until it clears. Follow what to do when a client won't pay an invoice. If accepted terms already permit a charge, quantify it with the invoice late fee calculator.
2. Keep the tax reserve off-limits. The 15% bucket is a cash target, not a tax projection. Size what you actually need with how much to set aside for 1099 taxes, then keep that money separate.
3. Measure runway before you cut. See how long usable cash lasts with the freelance runway calculator. A cut you cannot survive is not a plan.
4. Move a small slice each allocation date. Raise the profit and tax transfers a little. Lower the operating transfer only as fast as you can cancel or renegotiate real costs. Repeat until current percentages approach the targets.

If the operating account cannot cover planned spending even after a small move, name the specific contracts, software, staffing, or debt causing the gap. Then decide whether pricing must rise. Check that with the freelance hourly rate calculator.

Which mistakes and edge cases should you watch for?

• If you enter gross sales without removing true pass-through costs, you can select an inflated revenue tier.
• If you remove normal payroll or overhead as “pass-through,” your real revenue and operating needs can look artificially low.
• If you jump directly from current allocations to targets, you can leave committed bills unfunded.
• If you treat the tax percentage as a tax projection, you ignore entity, state, payroll, and household facts.
• If you annualize one unusually strong or weak month, you can put a seasonal business in the wrong tier.
• If you allocate an invoice before the payment clears, you spend money that is still a receivable.
• If you run a product company, you may also need a separate inventory account before applying these four percentages.
• If you run an agency, you may need a subcontractor account before applying these four percentages. Employees are operating expenses, not pass-through costs.

What does this calculator not do?

It does not calculate your tax bill. It does not tell you to move the full gap this month. It does not treat unpaid invoices as revenue. It does not create different percentage tables for each business-model label. It does not decide whether a late fee is enforceable.

When should you use this calculator?

Use it when you allocate cleared monthly cash under Profit First and want the published tier targets for your revenue band. That includes “Profit First percentages,” “what Profit First percentages should a freelancer use,” TAP-target, and allocation-bucket searches that need the four dollar amounts, not a second page.

Measure runway on cash you are not protecting with the freelance runway calculator. Quantify an agreed late charge on receivables with the invoice late fee calculator. Size the tax reserve itself with how much to set aside for 1099 taxes. Check whether pricing can fund owner pay and overhead with the freelance hourly rate calculator. Broader cash timing lives on the freelance cash flow hub.

What should you do next?

Calculate your real revenue for the trailing 12 months and your current allocation percentages before you move cash. Compare the current and target columns. Choose a small first adjustment, then verify that payroll and fixed obligations remain covered.

Put tax money in a separate account, but reconcile it against an actual 2026 tax projection. Repeat your review on a regular allocation date. Use cleared deposits, not unpaid invoices.

Profit First is Mike Michalowicz's method for managing cash. You allocate profit before deciding what remains for operating expenses, reversing the familiar “sales minus expenses equals profit” sequence. Numerandi is not affiliated with Mike Michalowicz or Profit First Professionals.