You’ve got more work than you’ve ever had. The phone keeps ringing. Your crew is booked out for weeks. And somehow — impossibly — you’re still scraping together the cash to cover payroll every fortnight.

If that sounds familiar, you’re not alone. It’s one of the most common and most demoralising experiences a trade business owner can have. And it has a name: the full order book, empty bank account problem.

The good news is there’s a simple, proven system that fixes it.

The Traditional Accounting Formula (And Why It Fails Tradies)

The way most businesses think about profit goes like this:

Revenue − Expenses = Profit

In theory, straightforward. In practice, profit is whatever’s left over after everything else has been paid — which, for most trade business owners, is close to nothing. Profit becomes an afterthought. Something you hope exists after everyone else gets paid.

The problem isn’t that you’re not making enough money. Often, trade businesses have strong top-line revenue. The problem is that expenses tend to expand to fill whatever cash is available. If there’s money in the account, it gets spent — on materials, on equipment, on a new van that seemed like a good idea at the time.

Flipping the Formula: Profit First

Mike Michalowicz’s Profit First methodology reverses the equation:

Revenue − Profit = Expenses

It sounds simple. It is simple. But the implications are significant.

Instead of hoping profit is left over at the end, you take profit first — before expenses are paid, before suppliers get their cut, before your own wage. You allocate a percentage of every dollar that comes in to a profit account, and you run the business on what’s left.

This forces discipline. It makes the business lean into what’s actually available rather than spending on what feels available.

How to Set It Up: The Bank Account Method

The practical implementation uses multiple dedicated bank accounts. Most Profit First practitioners recommend starting with five:

1. Income — All revenue lands here first
2. Profit — A percentage transferred every allocation day
3. Owner’s Pay — Your personal wage, separate from profit
4. Tax — Set aside so the BAS and tax bill are never a surprise
5. Operating Expenses — What the business actually runs on

Every time money hits your income account — typically twice a month on set allocation days — you divide it between the other four accounts using your target percentages.

Starting Percentages for Trade Businesses

If you’re just getting started, don’t try to allocate 20% to profit from day one. Start with what’s called your Current Allocation Percentages (CAPs) — where you actually are right now — and then set targets to work toward over 12–18 months.

A realistic starting point for a trade business doing $1M–$3M in revenue might look like:

Account	Starting %	Target %
Profit	1%	5–10%
Owner’s Pay	30%	35%
Tax	15%	15%
Operating Expenses	54%	40–45%

The numbers matter less than the behaviour change. Once you’re operating on a fixed percentage of revenue for expenses, you start making different decisions about what you actually need versus what would simply be convenient to have.

The Quarterly Profit Distribution

Here’s the part trade business owners enjoy: every quarter, you take half of your profit account and pay it to yourself as a reward for running a profitable business. The other half stays as a buffer.

This creates a rhythm. It makes profitability tangible — not an abstract line on a P&L that your accountant shows you once a year.

“The first time I took a quarterly profit distribution, it was only $3,200. But it felt completely different to normal revenue because I knew it was profit. That changed how I thought about the business.”

Common Mistakes to Avoid

Not using separate physical bank accounts. Running Profit First in a spreadsheet doesn’t work. The psychological impact of seeing separate balances — and the friction of moving money between accounts — is essential to the system.

Raiding the profit account. The profit account is not a float. It is not for emergencies. If you keep dipping into it, the system isn’t working and your expenses are too high.

Setting targets too aggressively too soon. If your operating expenses are currently 80% of revenue, you can’t immediately cut to 45%. You’ll run out of cash. Increment slowly — even 1% at a time — and let the business adjust.

Forgetting GST. In Australia, the GST component of your revenue isn’t yours. Consider running a sixth account — or treating GST as a pass-through that never enters your allocation calculations in the first place.

Is Profit First Enough on Its Own?

Profit First is a powerful behavioural tool. It creates the habit of prioritising profit and the discipline of running a leaner business. But it’s not a substitute for proper financial reporting, job-level profitability tracking, or a real understanding of your margins.

It works best when combined with:

• Monthly P&L reviews so you understand where the money is going
• Job costing so you know which work is actually profitable
• A cash flow forecast so you can plan ahead rather than react

Think of Profit First as the foundation — the system that ensures there’s always something left. The rest of your financial infrastructure builds on top of it.

The Bottom Line

If you’re running a busy trade business and wondering where all the money goes, Profit First is one of the fastest levers you can pull. It doesn’t require a new accountant, new software, or a business degree. It requires five bank accounts and the discipline to leave the profit account alone.

Set it up this week. Start with 1%. Increase it by 1% every quarter. Within two years, you’ll be running a genuinely profitable business — not just a busy one.