If you've read the book, you've got the idea. If you haven't, here's the short version: you split every dollar of revenue into separate bank accounts before you spend it. Profit, owner pay, taxes, and operating expenses each get their own bucket. You can only spend what's in the bucket. That's it. The magic is in the setup.
We've rolled this out for hundreds of contractors, restaurants, and service shops. Here's the no-fluff version of how to actually do it.
Step 1 — Open the five core accounts
Use your existing bank if they don't charge per account (most don't for business checking under 5). Otherwise, Relay, Mercury, and Bluevine all let you open multiple sub-accounts free.
- Income — every deposit lands here first. Nothing else.
- Profit — your reward for owning the risk.
- Owner's Pay — your actual paycheck.
- Tax — federal, state, payroll tax set-aside.
- OpEx — the operating account everything gets paid out of.
Two more accounts go at a separate bank (out of sight, out of mind): Profit Hold and Tax Hold. This is where the money sits until quarterly payouts. Different bank matters — it adds friction so you don't raid them.
Step 2 — Find your real numbers (the "instant assessment")
Pull the last 3 months of your P&L. Calculate:
- Real Revenue = Top-line revenue − materials/subs passed through
- Current Profit %, Owner Pay %, Tax %, OpEx % as a share of Real Revenue
This is where it gets uncomfortable. Most owners discover OpEx is eating 75–90% of revenue and profit is 0–3%. Good. That's the gap you're going to close.
Step 3 — Pick your Target Allocation Percentages (TAPs)
For Real Revenue under $500k, the book's defaults are a fine starting place:
- Profit: 5%
- Owner's Pay: 50%
- Tax: 15%
- OpEx: 30%
For trades and restaurants doing $500k–$2M, we usually run closer to 10% Profit / 25% Owner Pay (when there's a W-2 salary too) / 15% Tax / 50% OpEx. The exact split is less important than actually splitting.
Step 4 — Don't switch overnight. Phase it in.
Jumping straight to the TAPs will break you if you're currently running on 95% OpEx. Start with your Current Allocation Percentages + 1% to Profit and Owner's Pay. Re-evaluate every quarter. Push another 1–2% until you hit the target. Most clients get there in 12–18 months.
Step 5 — The 10th and 25th rhythm
Twice a month, on the 10th and 25th, you sit down for 15 minutes and:
- Look at the Income account balance.
- Multiply by each TAP %.
- Transfer the calculated amounts to Profit, Owner's Pay, Tax, OpEx.
- Income account goes to zero. Every time.
Twice a month — not weekly, not daily. You want a rhythm small enough to skip a slow week but tight enough that money doesn't pile up and feel "spendable."
Step 6 — Pay yourself like an employee
Owner's Pay sweeps to your personal account on a regular schedule (we recommend bi-weekly). You live off your personal account. The business card is for business. No "I'll just grab groceries with it."
If you're an S-corp, run a W-2 through real payroll on top of this — that's how you handle reasonable compensation cleanly. The Owner's Pay bucket funds both the W-2 and the distributions.
Step 7 — Quarterly profit distribution
Every 3 months, take 50% of what's in the Profit Hold account and distribute it to yourself. Spend it on something that isn't the business. A trip. A new truck. A boring index fund. That's the point — it makes ownership actually feel like ownership.
The other 50% stays as cash reserves. Sleep-at-night money.
The first 90 days — what to expect
- Week 1–2: Sticker shock. OpEx feels tight. This is the system working.
- Week 3–6: You start cutting subscriptions, renegotiating with vendors, raising prices. You can't not.
- Month 2: First quarterly profit distribution. Suddenly the system has your buy-in forever.
- Month 3: Tax bucket pays the IRS without flinching. First time that's ever happened.
The mistakes that kill it
- One bank, all accounts visible. You'll borrow from Tax. Move Profit Hold and Tax Hold elsewhere.
- "I'll start next month." No. Start with the next deposit. Even at 1%.
- Skipping the 10/25. The rhythm is the whole system. Calendar it.
- Not setting up payroll properly. Owner pay without real W-2 / draw structure creates a tax mess.
This is exactly the setup we install for clients in CA, NV, and AZ — we open the accounts, set the TAPs based on your real numbers, wire up payroll, and run the 10/25 sweeps so you don't have to. If you'd rather skip the DIY and have it just working, that's our whole job.
