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  • Writer's pictureJacob Curtis

Financial Clarity: Navigating Profit First in the Quilt and Craft Industry

What do you do after you have performed the Instant Assessment for your quilt and craft shop? That is what I am going to talk about today. If you haven’t performed your Instant Assessment, please see my previous video and download the free step-by-step Profit First Starting Guide by clicking the link below.

You Need a Profit First Bookkeeper

Now that you have decided to use the Profit First system in your quilt and craft shop, you need to tell your bookkeeper. Why? Because you need their support. If your bookkeeper is not on board, implementing and using the Profit First system will probably not be successful. You need to get your bookkeeper on board. Ask them to read the book cover-to-cover so that they can learn and understand the system and help support you.

If they are unwilling to support you with Profit First 100 percent, you need to find a new bookkeeper, like me. My team and I are Certified Profit First Professionals.

Your Profit First Accounts

You should have already opened your accounts, but now is that time, just in case you haven’t.

You need six checking accounts at your primary bank. The six accounts should be nicknamed or labeled INCOME, INVENTORY, PROFIT, OWNERS COMP, TAX, and OPERATING EXPENSES (or OPEX).

A quick tip: use your existing checking account as your OPERATING account.

Except for the INCOME account, I recommend including your current and target allocation percentages in the account’s nickname. For example, for your PROFIT account, if you had a current allocation of 1 percent and a target of 5 percent, then you would nickname it “PROFIT 1%, TAP 5%.” This will help you know what percentage to use when allocating or transferring cash into the account.

Side note: if you use Relay, the official banking platform of Profit First, you can automate your transfers. Click my affiliate link below to get started with Relay today.

Your Current Allocation Percentages

If you have a current allocation percentage of zero in one or more accounts, like most of the quilt and craft shops I work with, then use 1 percent as your current allocation percentage for those accounts.

Remember, your current allocation percentages cannot add up to more than 100 percent.

Additional Accounts

Once your foundational accounts are opened and labeled, you will need two more accounts: PROFIT HOLD and TAX HOLD. These accounts should be opened at a second bank. These accounts hold the money you only need access to once a quarter. These accounts are at a second bank to help ensure that you don’t rob Paul to pay Peter. With these accounts, we are employing the out-sight, out-of-mind principle of Profit First.

Start Slow

You know your current allocation percentages or CAPs, your target allocation percentages or TAPs, and your accounts are created and nicknamed. Now, you are making progress!

You need to start slow. You cannot instantly start allocating based on your target percentages, even if your business could do more than your current allocation percentages. You start small to help you get into the habit. Set your current allocation percentages low enough that it will not be detrimental to the business and where there is no excuse not to try it–at least 1 percent in each account.

If your shop can’t afford to set aside just a few percentage points of your revenue, you have much bigger issues to deal with immediately.

Your Initial Allocation

Now that your accounts are set up, it’s time to make your initial allocation. When you look at your primary bank and your six accounts, the only account with any money in it is your OPERATING account (except for any minimum balances that may apply).

Subtract any outstanding checks and payments you have pending from that account and transfer the remaining balance to the INCOME account.

For example, let's say you have $10,000 in your OPERATING account and you have $3,250 in pending payments and checks. You would transfer the difference of those or $6,750 into your INCOME account.

Now, you are going to do your first allocation. Transfer the money in the INCOME account into all the other accounts (INVENTORY, PROFIT, OWNER’S COMP, TAX, and OPEX) based on the current allocation percentages you set. This is your first-ever allocation.

Continuing with the example above.

Let’s say your current allocation percentages are as follows: 50% for INVENTORY, 1% for PROFIT, OWNERS COMP, and TAX each, and the remaining 47% for OPERATING.

You have $6,750 in your INCOME account. You transfer 50 percent or $3,375 to the INVENTORY account; 1 percent or $68 (rounded to the nearest dollar) to the PROFIT, OWNER’S COMP, and TAX accounts; and the remaining $3,171 to the OPERATING account.

It’s that easy. Now, you make financial decisions based on your account balances.

It feels good to know you now have a system in place and financial clarity maybe for the first time ever. 

Some Motivation

But maybe the immediate picture is ugly. And that’s fine because, over time, you will be motivated to improve your allocation percentages. You will be motivated to reduce expenses, and perhaps even more importantly, you will find ways to increase your profitability through innovation and thinking up new, better, and more efficient operations.

This system will make it undeniably clear what money you have and for what purpose it is being used. And with this clarity, you can make much better decisions to improve the financial health of your quilt and craft shop.

Going Forward

Now that you’ve seen an example, do you have any deposits to make today? If so, tally up the deposits, deposit them into your INCOME account, and immediately distribute the money to all the other accounts. Do this for every deposit going forward. But don’t worry, we will get you into a rhythm shortly to make this process manageable.


I am not saying that lightly. You’ve just taken a big step. This is likely the first time in your entire business life that you have deliberately accounted for your profit first. Before anything else, you made sure you addressed your profit, your personal income, and your tax responsibilities. That’s a big deal. And it is a big step to a very, very healthy shop.

Update Where Your Deposits Go

Now that you have established your accounts and made your first allocation, we need to get the money from somewhere to fund those accounts. And there are only two ways that can happen: sales or expenses.

Let’s start with sales. We need to update your credit card processor, like Rain Payments, WorldPay, Shopify, or whatever merchant processor you use, to deposit your customer payments into the INCOME account. And whatever cash and checks you collect also need to be deposited into your INCOME account.


Now, let’s review your expenses. This is especially important if you are currently spending more than 100 percent of your sales. Sales growth can and does happen, but it takes time and won’t happen overnight.

From all the quilt and craft shops and businesses I have met, it is pretty easy for most of them to cut 5 to 10 percent of expenses overnight, such as frivolous costs like unused recurring membership fees, office space, that expensive car that is “justified” because it is an expense, and perhaps even extra staff who aren’t helping your cause much. Cutting unnecessary expenses might bring you some emotional and psychological pain, but it’s much easier than trying to make new sales out of nothing or going out of business.

Act Your Wage

You need to run your business based on what you can afford to do today, not what you hope to be able to afford someday. This means that you sometimes have to wait to hire someone or make a high-ticket purchase. When big expenses show up, you sit down and ask yourself, ‘Do we really need this?’ If you determine it would hurt your profits today (which is to say, the longevity of your quilt and craft shop), don’t buy it.

I have shared and will share more on cutting expenses in other videos. But cutting expenses is easier and quicker than conjuring new sales out of nothing. You will learn to use only what you need and not be wasteful. You will pay fairly for what you use but will use less. And you are going to love it.

Get Into A Rhythm

The next step is to get into a rhythm. I recommend that the day you process payroll, you do your allocations first, then process payroll, pay any bills, review any pending inventory orders, cancel old orders, and place new orders. The key here is to do all of this on the same day. Do not spread it over multiple days.

The day you allocate money to your accounts is the day that you pay your employees and bills and review and place new orders. Doing all this on the same day frees up your mind between allocation days to focus on other important tasks.

The Quarterly Rhythm

And finally, once a quarter, pay your profit distribution and estimated taxes and adjust your current allocation percentages.

Next Steps

Using Profit First saved our shop. If you stick with it, it can help you, too. Click the link below to download the free step-by-step Profit First Starting Guide.

Email me at if you would like help with this and piecing together financial freedom in your shop.

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