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Split a payment
Percentages (must total 100)
The idea
Instead of paying yourself whatever is left over, you move a fixed percentage of every payment into separate accounts the moment it arrives: one for profit, one to pay yourself, one for taxes and one for running the business. The method comes from Mike Michalowicz's book Profit First; this page is our own calculator and is not affiliated with the book.
Choosing your percentages
- Taxes: the 25% default is only a placeholder. A freelancer's real rate depends on income and state. Work it out with the quarterly tax calculator, then set this bucket to match.
- Operating expenses: look at last year's business costs as a share of revenue.
- Profit: small is fine. The point is making it a habit.
- Owner's pay: what's left. If it's too low to live on, the fix is raising rates or cutting costs, not skipping the tax bucket. See the hourly rate calculator.
Setting up the accounts
Some business banks let you open several accounts or sub-accounts for free; others charge for each one. Compare options in our business bank account guide. Move money on a fixed schedule (for example the 10th and 25th) rather than after every payment if that's easier.
FAQ
Are these the official Profit First percentages?
No. The book publishes its own target allocation tables by revenue size. The defaults here are simple illustrative numbers you should adjust.
Do I need four bank accounts?
It helps, because money you can't see is harder to spend. At minimum, keep taxes in a separate account.