How much profit should I allocate for my new waffle business with $4,000 of debt?

Christie JungeA Plus Solutions Inc. · CEO | Profit First Professional

Ask Mike- What Percentage To Allocate Toward Profit Using Profit First?

11 Dec 2019 · 1 min

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Dan runs a new waffle business with $4,000 in debt and doesn't know how much profit to set aside. Mike says calculate your historical profit margin, add 1-2%, then allocate that each quarter. Use 95% to pay down debt fast and keep 5% for celebration.

Questions this video answers

Determine an optimal profit percentage based on your historical profit margin plus 1–2 %, allocate that each quarter, and use about 95 % of the quarterly profit allocation to pay down debt while reserving roughly 5 % for celebration.

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Welcome to Ask Mike. I'm Mike Michalowicz. I got a question from Dan Ferguson about how he's using Profit First. He's got a brand new business and he's in the waffle business and they have $4,000 of debt. He doesn't know what amount of money to allocate to a profit. Here's what you do. Allocate the optimal profit percentage that you determine based upon your historical profits, plus 1 or 2%. Build the profits, and every quarter keep ramping it up. Even if you have debt, Dan. And here's what happens: when you do your profit allocations at the end of each quarter, use the vast majority of it, 95% or more, to eradicate your debts, 5% to celebrate. Repeat that process until all your debts are eradicated, and then the next profit distribution— well, in that case, Dan, you're gonna eat a lot of waffles, 'cause it's all going to you. And if you have a question, Make sure you send a question to AskMike@mikemacallos.com and I'll answer your question on the next video.