In this instructional video, Ryan Vaughn explains the “remove temptations” principle from Mike Michalowicz’s Profit First system and how he adapted it for micro‑gym owners. He first outlines the standard Profit First cash‑flow: income is deposited into an income account and, twice a month, allocated to tax, owner’s pay, profit distribution, operating expenses, equipment, and team‑member accounts. The temptation arises because the tax and profit accounts can accumulate large balances that owners might be tempted to dip into for operating expenses. Vaughn describes why, in his experience, most micro‑gym owners already have the discipline to follow Profit First without this extra step, but for those who feel tempted, he recommends creating “remove‑temptation” accounts at a different bank (e.g., moving money from a Chase account to a Wells Fargo account). This out‑of‑sight, out‑of‑mind approach mirrors the classic “don’t keep candy in the house” analogy. He advises owners to assess their own discipline and, if needed, set up the separate accounts, accessing the funds only when making quarterly tax payments or profit distributions. The video ends with a call to share, subscribe, and a friendly sign‑off.
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Hey, in this tip today I wanted to go over a Profit First principle we call remove temptations. Now this principle, it was written one way in Mike Michalowicz's original book Profit First, and then when I wrote Profit First for Microgyms, we needed to adjust it for the microgym owner because our experience was showing that people weren't following it. So let me first talk about what this principle is and And how we recommend MicroGyms utilize this principle. So the idea is an overview here. If you're running the Profit First system, which you should, there is a flow of cash. You have income coming into your income account, and then twice a month you sit down and you allocate money from your income account into a tax account. Mm-hmm. An account for your owner's pay, a profit distribution account, your operating expense account, equipment, and team members. We recommend those accounts. Now, the remove temptation principle comes because twice a month you're going to take money from your income account, and specifically we're focusing on your tax account and your profit account. Now, your tax account is for your income tax burden because the business should be the one that bears that burden. You should not have to come out of pocket from your personal take-home to cover your taxes. The gym should cover that. So if you're doing it the way the IRS prescribes, you would be making quarterly estimated tax payments. To the IRS. Well, what that means is that you're going to have 6 deposits in the account before there's ever a withdrawal. That amount can get large. And if you see that amount, it could be a temptation to use it in your operating expense accounts, especially if you are currently spending more money than the gym can actually afford. So you're effectively stealing from yourself, or as Mike says, you're stealing from the government. I'm not going to go that far. The other account is the profit account. That account also is only going to make a distribution once a quarter, but you actually only distribute half of the amount in the account. So that balance is always going to be there, and it's going to— so it grows and then it decreases and then it grows, but if you find yourself in a pinch and you see that number in that account, it could be a temptation to then use it for a different purpose other than for your profit distributions. So that's where this principle, remove temptation, comes from. Now in my book Profit First for Microgyms, I go into detail as to how to really remove the temptation, but then the reasons why it's not a It's not as strong of a, you have to do this, for micro gym owners as Mike explains in his book for the, you know, the just the generic business owner. We've just found that all the gym owners I asked to, except 2, all the ones that I asked and surveyed and had conversations with, they didn't actually do the step I'm going to share with you. Uh, the remove temptation step because they didn't need to. They have the discipline and they were successfully running the Profit First system without this extra step in there. And so if you don't need an extra step, why have it? But if you do find yourself needing this type of protection, then certainly I'm going to recommend this. So the remove temptation principle Is to set up remove temptation accounts in a separate financial institution. So if I have a bank account with Chase, and that's where most of my banking happens, I would say set up a bank account with Wells Fargo, and I would take the money in those tax and profit accounts at Chase, and I'd save them at Wells Fargo. It's removed temptation because it's out of sight, out of mind. Like for me, I like Oreos, I like Reese's Peanut Butter Cups. If they're not in the house, I'm not gonna go crazy because I don't have them. But if they are in the house, it's like all I can think about. Like, oh man, let's go have a Reese's Peanut Butter Cup. You know, it's awesome. So out of sight, out of mind is the idea. And then you only access that money when you're actually making The tax payment, or the quarterly profit distribution. Now again, like I said, some gym owners have not done that because they didn't need to. Some of them, well, in the book I go into more detail of some of the reasons why they gave. Just a quick one is, look, money is coming into the income account as well, but they're still utilizing those, that money, and not being tempted to not put it in the different spots. So a lot of them just came down, well, I committed to it, why would I not follow it? Some people don't have that discipline. So you know yourself better than anybody else. If you think you might be tempted by the amount of money that's going to be sitting in the tax account and the profit account, and you may feel that temptation to use it in, say, your operating expense account, go ahead and set up these remove temptation accounts. So that's the principle there. If you enjoyed the tip, please share with a friend and, uh, please subscribe as well. We enjoy serving you and we hope you have a good day.
