How to Start Profit First for Contractors (Without Breaking Your Business)

Have you ever wrapped up a big job, looked at your bank account, and thought:

“Where the heck did it all go?”

You’re not alone.
Most contractors are running million-dollar crews on $50 cash flow—and it’s exhausting.

If you’re a:

• General contractor

• Small GC or handyman

• HVAC, electrical, or plumbing company

…and your bank balance feels like a yo-yo, this is your blueprint for setting up Profit First the contractor way.

You’ll learn:

• Which bank accounts to open

• What percentages to start with

• What to do this week to get your cash under control

The Simple Shift: Profit First in Plain English

Traditional accounting:

Sales – Expenses = Profit

Profit First flips it:

Sales – Profit = Expenses

You decide up front:

• How much profit you keep

• How much you pay yourself

• How much goes toward taxes

Then your business has to learn to run on what’s left.

The “Envelope System” for Your Business

Think of Profit First like the old envelope system for personal budgeting—just with bank accounts:

Instead of one big pot of money, you intentionally split cash into different “envelopes” (accounts) so you can see what’s truly available.

At a minimum, you’ll use:

1. Income – all money lands here first

2. Profit – your reward for owning the business

3. Owner’s Pay – your paycheck for working in the business

4. Tax – for Uncle Sam, so tax time doesn’t wreck you

5. Operating Expenses (OPEX) – what’s left to run the business

For contractors, we add one more key concept: real revenue.

The Contractor Twist: Real Revenue vs. Fake Rich

If you’ve ever felt rich until the vendor bills hit, here’s why:

A big chunk of your deposits are:

• Materials

• Subcontractors

You don’t really earn that money—it just passes through you.

So we focus on:

Real Revenue = Total Income – Materials & Subcontractors

Your Profit, Owner’s Pay, Tax, and OPEX percentages are all based on real revenue, not gross.

This one shift fixes most of the cash chaos I see in contractor businesses.

You can also set up a separate Materials & Subs account so those dollars never mix with OPEX.

The Core Accounts (Plus Optional Buffers)

Here’s the basic structure:

• Income – money comes in, no bills paid from here

• Materials & Subs (optional) – holds job costs so they don’t inflate your “spendable” balance

• Profit – even starting with 1% matters

• Owner’s Pay – your regular paycheck

• Tax – a % of real revenue every allocation day

• OPEX – everything left after the above

Optional contractor accounts:

• Payroll account – if you pay weekly

• Buffer / drip account – for slow seasons

• Building / equipment fund – for future tools, trucks, or office space

Starter Target Percentages for Small Contractors

We talk about two sets of percentages:

• TAPs = Target Allocation Percentages (where you want to be)

• CAPs = Current Allocation Percentages (where you’re starting)

For a contractor under about $1.5M gross, based on real revenue, healthy targets might be:

• Profit: 3–5% (eventually 10% is great)

• Owner’s Pay: 35–45%

• Tax: 10–15%

• OPEX: 30–45%

If you’re not used to paying yourself or taking profit, your starting CAPs might look more like:

• Profit: 1–2%

• Owner’s Pay: 20–30%

• Tax: 10–12%

• OPEX: everything else

Each quarter, you nudge CAPs closer to TAPs by 1–2 points at a time. Slow adjustments work better than big jumps that force you to steal from Profit and Tax just to pay bills.

How Often to Move the Money

In the Profit First book, the rhythm is:

Twice a month: the 10th and 25th.

On those days you:

1. Look at the Income account

2. Move money into:

   • Profit

   • Owner’s Pay

   • Tax

   • OPEX

   • (and Materials & Subs if using that account)

For contractors, especially service-based trades getting paid often, I like weekly allocations—for example, every Tuesday:

• It becomes a habit

• It keeps OPEX funded for weekly payroll

• You get faster feedback on whether your pricing and spending are working

Pick a schedule that matches your cash cycle—and stick with it.

Your First 7 Days: Quick Start Plan

Day 1–2: Open the Accounts

Set up:

• Income

• Materials & Subs (optional but recommended)

• Profit

• Owner’s Pay

• Tax

• OPEX

• Optional: payroll or buffer accounts

Savings accounts are perfect for Profit and Tax.

Day 3: Calculate Real Revenue

Pull a P&L for the last 3–6 months:

• Total income

• Minus total materials + subs

• That’s your real revenue

This tells you what you truly have to work with.

Day 4: Set Starter Percentages

Choose realistic starting percentages, for example:

• Profit: 1–2%

• Owner’s Pay: 25–30%

• Tax: 10–12%

• OPEX: remainder

The key is to start now, even if the dollar amounts are small.

Day 5: Redirect Your Bills

Update your automations:

• Vendor bills for materials & subs → Materials & Subs account

• Recurring overhead bills → OPEX account

Most contractors keep their existing checking as OPEX and open a new Income account, then update Stripe/CRM deposits to flow into Income.

Day 6: Do Your First Allocation

Whatever’s in Income:

• Move your starter percentages into Profit, Owner’s Pay, Tax, OPEX, and M&S

• Celebrate your first intentional profit transfer—even if it’s $20

Day 7: Lock In the Habit

• Add recurring weekly or 10th/25th calendar reminders

• Turn off autopays hitting the wrong account

• Confirm deposits flow into Income

You’ve now put a simple, powerful system in place.

Common Pitfalls to Watch For

• Using M&S money for overhead
  That’s stealing from jobs and guarantees you’ll always be chasing cash.

• Setting allocations too high too fast
  Start with 1–3% profit and small increases each quarter. Don’t choke the system.

• Underfunding taxes
  If you’re unsure, default to 12–15% of real revenue into your Tax account until we dial it in.

• Ignoring seasonality
  If winter or hunting season slows you down, build a payroll/buffer account now, during the peak months.

Real clients with seasonal dips—like contractors tied to the housing cycle—have been able to make those slower months manageable by:

• Knowing their monthly nut

• Funding Profit and buffer accounts during busy periods

• Continuing to pay themselves even when work slows

Next Steps: Get Help Implementing Profit First

You don’t have to figure this out alone between bids, call-outs, and 14-hour days.

As a Certified Profit First Professional, my team and I help contractors:

• Set up the right accounts and percentages

• Build cash flow forecasts

• Dial in job costing

• Plan for taxes, tools, trucks, and long-term growth

Two easy ways to move forward:

1. Book a discovery call
   👉 meetwithsavvy.com

2. Take the “How Profitable Are You?” Quiz
   👉 savvytaxstrategies.com/quiz
   It’s quick, and you’ll get a profitability snapshot plus the core chapters of Profit First in PDF.

If your crew is working hard but your bank account doesn’t reflect it, you don’t have a hustle problem—you have a cash flow system problem.

Profit First gives you a clear, simple way to fix it—one account, one allocation, one week at a time.