3. Profit First System
Bank 1-Convenient Bank Bank 2-Inconvenient Bank
Income Profit
Owner’s Pay Taxes
Operating Expenses
4. Profit First System
● Every two weeks (or 10th and 25th) allocate your money from your
“Income Account” based on Business Allocation Percentages
○ Profit: 5%
○ Owner’s Pay: 50%
○ Tax: 15%
○ Operating Expenses: 30%
5. Profit First System
● Example: $10,000 to allocate from the “Income Account”
○ Profit: $500
○ Owner’s Pay: $5,000
○ Tax: $1,500
○ Operating Expenses: $3,000
6. Defining Your Revenue Formula
● What is your Revenue Goal? Ex: $500,000
● How much do you charge per case? Ex: $5,000
● How many cases do you need to hit your revenue goal? Ex: 100
● Divide by 50 work weeks in a year and you need to open how many cases per week?
Ex: 2 Cases
● On average how many weeks does it take you to close a case?
Ex: 10 weeks
● Calculate your open case volume. Ex: 20 open cases
7. Define Your Marketing Budget
● How many new cases do you need per month? Ex: 8 Cases
● How many consultations do you need to have to get X number of new
cases per month? Ex: 24 Consultations
● How many leads do you need to book X number of consultations?
Ex: 96 Leads
● What is your cost per lead? Ex: $5.00 per lead
● What should your marketing budget be per month? Ex: $480
8. Trust Funds
● Advanced Client Costs
Use Trust Funds Don’t Use Trust Funds
No Cash Out of Your Firm Cash Flow Out of Your Firm
Not Paying For Exp. For Firm
Not An Exp.> Per IRS> Treated as Asset
Not Reducing Taxable Income
9. Merchant Processing Fees
● ACH Transactioins Typically a Cheaper Option
○ LawPay Fees:
○ Standard Cards: 1.95% + .20c
○ Corporate/Reward Cards: 2.95% +.20c
○ AmEx: 3.5% + .20c
○ ACH or eCheck $2.
10. Merchant Processing Fees Example
Switching 10 Transactions at $1,000 Each
Standard Specialty AmEx ACH
Cost $197 $297 $352 $20
Mon. Savings $177 $277 $332
Yr. Savings $2,124 $3,324 $3,984
11. Software and Recurring Subscriptions
● Grass is Greener
● Becomes like a Gym Membership
● Review Every QTR
○ “C” for Cut Expense
○ “R” for Replace with Alternative
○ “K” for Keep as it is neccessary
12. Outsourced Hiring
● Remote Work-Bigger Candidate Hiring Pool
● Highly-Qualified Professionals at a Fraction of the Cost of An
Employee
● Contractors-No Expensive Healthcare Benefits, Retirement Benefits or
Payroll Taxes
14. Taxes- S-Corp Cut Salaries
● Required to Pay Reasonable Salary
● Track Other Tasks: Answering Phone, opening mail, paying bills, etc.
● By Reducing Salary You Eliminate Federal Payroll Taxes
○ Current Rate of 15.3%
15. Taxes-Hire Your Spouse
● Shareholder’s > 2% Ownership -Medical Expenses & Insurance
● Spouse Elects for Insurance Coverage as Employee
● Rules about Excluding Employees
16. Taxes-Hire Your Kids
● Time Cards & Duties Performed
● Pay Must Be Reasonable
● Pay Under $12,400-No Fed Tax Return
● Only Pay State Income Tax
17. Roth IRA Kids
● Contribute up to $6,000 Post-Tax Each Year
● Contributions Can Be Drawn-No Penalty-No Tax-Anytime
● Ex: Kid works from 8 to 18 and you max contributions- $60,000 that
could be drawn to help pay for college, buy a car, etc.
● Earnings on Investments can be Drawn After 59 ½ Years of Age