Four-Part Series with Accountant Julie Herres, Part 4: “Profit First” in Private Practice | GP 10

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Four-Part Series with Accountant Julie Herres, Part 4: "Profit First" in Private Practice | GP 10

What does it mean to put profit first? What are some mistakes business owners make when it comes to profit? How can you implement ‘Profit First’ in your business?

In this podcast episode, Alison Pidgeon speaks with Julie Herres about implementing ‘Profit First’ in private practice.

Meet Julie Herres

Julie Herres is the owner of GreenOak Accounting. The firm provides bookkeeping, accounting, payroll, Profit First services to private practice owners throughout the United States.

Julie and her team have worked with hundreds of private practice owners, so they are uniquely positioned to be a trusted advisor to clients.

To get more information on GreenOak Accounting’s services or to schedule a free consultation, visit or connect on LinkedIn and Twitter.

In This Podcast

  • What does it mean to put profit first?
  • Mistakes business owners make
  • How to implement profit first
  • Things to do
  • Mistakes to avoid when implementing ‘Profit First’

What does it mean to put profit first?

Traditionally in accounting, you look at income – expenses = profit. In the book, Mike suggests that you look at income – profit = expenses

Mistakes business owners make

Profit becomes an afterthought and many times this results in the owner not paying themselves. Therefore what we’re trying to do is use the power of allocations so that you’re taking the income and splitting it into 4 main categories:

  1. Operating expenses
  2. Owners pay
  3. Taxes
  4. Profit

How to implement ‘Profit First’

  • Read the “Profit First” book
  • Open separate accounts
  • Create a budget plan
  • Have a payroll system in place
  • Consider all overhead expenses

Things to do

  • Create a payroll account
  • Do transfers into the accounts weekly for twice a month
  • Ensure that all expenses are covered
  • Ensure that taxes are paid
  • Avoid borrowing from other accounts

Mistakes to avoid when implementing ‘Profit First’

Make sure you put it on the calendar to make sure you’re not borrowing from your future to pay for your present.

  • Not putting the transfers on the calendar
  • Payment due dates are not considered
  • Profit percentages are incorrect
  • Not increasing the profit percentages and being intentional with transfers
  • Not viewing the business’s financials on a regular basis

Sign up for free consultation and 5 days of profit-boosting tips for private practice by clicking here!

Books mentioned in this episode

Useful Links:

Meet Alison Pidgeon

Alison Pidgeon | Grow A Group Practice PodcastAlison is a serial entrepreneur with four businesses, one of which is a 15 clinician group practice. She’s also a mom to three boys, wife, coffee drinker and loves to travel. She started her practice in 2015 and, four years later, has two locations. With a specialization in women’s issues, the practices have made a positive impact on the community by offering different types of specialties not being offered anywhere else in the area.

Alison has been working with Practice of the Practice since 2016 and has helped over 70 therapist entrepreneurs start and grow their businesses, through mastermind groups and individual consulting.

Thanks For Listening!

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Podcast Transcription

[ALISON PIDGEON]: Starting a group practice can be really overwhelming. So, if you’re wanting some help to figure out how to start and grow a group practice, please go to and click on Work With Us. There you’ll find information about everybody on the Practice of the Practice team, including me. I specialize in helping people grow a group practice, and I would love to work with you. So please fill out the contact form on the website or email me, [email protected].
Hi, my name is Alison Pidgeon and I am your host for the Grow Group Practice podcast. We are doing a four-part series with an accounting firm that specializes in helping therapists called Green Oak Accounting. I am interviewing Julie Harris, who is the owner of the firm and she is walking us through various aspects of your financials related to group practice. And today is our last episode so we’re going to be talking about Profit First. So, if you’ve never heard of Profit First is a book that was written by Mike Michalowicz and he talks about how to look at your financials in a business and Julie is going to explain the sort of overall concept in the interview. But if it’s something that interests you, definitely check it out. It’s a pretty well-known business book and, yeah, so I think I’ll let Julie kind of take it away. She does a great job of explaining how to set up Profit First in your private practice.
Today on the podcast, we’re finishing up our four-part series with Julie Harris. She is an accountant and the owner of a firm Green Oak Accounting located in Virginia. She works with practice owners all over the United States to help them with the finances related to their business, whether it’s helping them implement Profit First or giving them financing financial forecasting and budgeting support. Julie and her team have worked with hundreds of pirate practice owners. That is their specialty. And I am so grateful that she decided to lend us all of her knowledge and her tips for this four-part series. Welcome back, Julie.
[JULIE HARRIS]: Thanks for having me, Alison.
[ALISON]: Yeah. So today we’re going to be talking all about Profit First, which is a very popular book written by Mike Michalowicz, and definitely has made the rounds with therapist business owners who are really wanting to make sure that their finances are you know, allocated the right way, they have enough to pay themselves, they have enough to turn a profit. So, can you tell us a little bit about kind of Profit First from your perspective and maybe how you help business owners who might be looking at starting to implement that concept in their own business?
[JULIE]: Sure. Well, Profit First is very, very popular in particular because it really, really works. The basic premise of the book is that, traditionally in accounting we look at income minus expenses equals the profit and so what Mike says is that really you should look at income minus profit and that equals the expenses. So, you should consider the Profit First and then everything that’s left, like that’s what you have left for the expenses.
[ALISON]: Right. So where do people, what do people typically do or how do they get themselves into trouble with maybe not leaving enough for profits?
[JULIE]: Right? So, if you’re looking at the expenses first, profit is more of an afterthought, right? It’s not something that’s planned ahead, and so it’s kind of whatever’s left and a lot of times that’s not enough or the owner is not paying themselves. And so, what we’re trying to do is to use the power of allocations so that you’re taking all the income that’s coming in and just splitting into four main categories. And those are operating expenses, owner’s pay, taxes, and profits and you’re being intentional about how you’re spending the money.
[ALISON]: Okay. So like if I wanted to get started with Profit First, I understand, because I read the book, so I understand that he recommends you open up several different accounts to make sure like you’re putting those money in those accounts and you’re not just like sticking it all in one account and just saying like, “Well I know how it’s all split out.” So, is that something that you recommend? Like if you want to implement Profit First, like right off the bat, like go to the bank and open all these accounts or is there something else you’d recommend first?
[JULIE]: Yes. So, if you want to implement Profit First, I would recommend having read the book. But then the next step would certainly be opening all the accounts and then next I would say make a plan for it. So, if you don’t have a budget, if you’ve never looked at your expenses, you probably want to take a look at that to be able to set yourself up for success. So one of the things that I see happen most often is that owners will start Profit First and not fund the accounts enough to begin, because the reality is you’re going to need to run payroll and you’re going to need to pay for your rent or your marketing or whatever your operating overhead expenses that you’ve got. And so, if you’re not considering those and putting enough money in those accounts for the next 15 days, you’re setting yourself up for failure. And that’s not what we want for you.
[ALISON]: Yeah. So, I understand because we were talking before, we started recording, that people tend to seek out your help with Profit First because they’ve gotten themselves into a financial mess and now, they’re wanting to fix it, right? So, which is great, like, you know, we should all be looking for proactive ways to improve our businesses, especially when we get ourselves into trouble. But, so let’s say like, there’s just not enough money to go put all the allocations in those accounts right off the bat. Is there some sort of like intermediary step they can take to start like cleaning things up?
[JULIE]: Well, so one thing that we sometimes do is for the first few weeks to do the transfers weekly because when you’re implementing Profit First, basically all of the income is going to come into the income account and then you don’t touch that. You only transfer those funds to each of the other accounts twice a month, typically on the 10th and the 25th. Sometimes there are some offset dates, but basically all the income is coming in and it’s sitting there until you’re ready to transfer it to profit, taxes, owners pay, and operating expenses twice a month. But so since those transfers are only happening twice a month, for example, if you start on the first and you’re putting a thousand dollars in your operating expenses account and your rent is coming up and your rent is $3,000, so you’re not transferring funds into that account until the 10th. That might be a problem. So for those first few weeks, we either need to wait until there’s enough cash to properly fund that first, those first transfers or to transfer a little bit more often temporarily in order to get to cover the expenses because we don’t want your checks to bounce or your payment to get declined or anything like that.
[ALISON]: Right. So, there’s sort of like a, you know, you’re making baby steps towards being able to sort of follow the model, how he describes it in the book?
[JULIE]: Yes.
[ALISON]: Okay.
[JULIE]: And people tend to want to start really aggressive. They read the book and it’s very well written, Mike is an awesome storyteller. Like, “I’m all in. I’m going to start with the profit percentage of 10%.” I you haven’t been, if you don’t have those margins currently, that’s going to put a lot of strain on everything else. So, I would say, it’s important and encouraged in the book to take baby steps like to start at 1% because you can curve out 1%, right? You can make that work. That’s doable. That’s a little baby step instead of trying to get too aggressive right from the beginning and then having to backslide from that.
[ALISON]: Yeah, because I could see how you might get into the mindset of like, “Well I don’t have 10% to put away, so why bother doing it at all?”
[JULIE]: Right, right. And then you start borrowing from all of the different accounts. So, if you don’t have enough to pay rent, then maybe you’re borrowing a little bit from profit or borrowing a little bit from taxes. And then at that point, what’s the point? You’ve already, you can always restart, but if you’re finding yourself wanting to borrow, like then the allocations aren’t correct. That’s not working.
[ALISON]: Right. Do you find when you’re helping practice owners implement Profit First in their business, do you find that it helps them to make some mindset shifts around money and like budgeting and how to save and like, what do you see happen there?
[JULIE]: So, I do. One of my favorite moments is when we’re chatting with a business owner, a client, and they say, “Oh well, you know, my quarterly estimated taxes are due. I’m going to have to take out, you know, 6,000 from the business account.” And we can tell them, “Wait, do you remember you have that tax account over here and there’s more than that in that account? So, you’re good. You don’t need to actually take anything out from the cashflow of the business. Like you already have the money saved.” And that sigh of relief that you can hear is so amazing. Like there’s money left for all of those things. So, if there is an unexpected expense or you need personally to take out money because you have an unexpected bill, like the cash is there and it’s so nice to have that buffer.
[ALISON]: Yes, because I have been in that situation in the early days of, you know, not exactly knowing how to calculate what I owed in taxes. And then I had my CPA do it for me and she told me what I owed and I was like, “What?”
[JULIE]: Yes.
[ALISON]: You know, like, “I can’t believe I owe that much.” And I think I hear that story a lot too from other people.
[JULIE]: Yes.
[ALISON]: Yeah. That’s not a good place to be.
[JULIE]: And one of the great analogies that Mike has is like, basically by using allocations, you’re transferring funds to your all the different accounts, but you’re essentially eating from a smaller plate, right? So instead of having all the cash in one account where you’re just, you’re logging into the bank probably on your phone app and seeing like, “Okay, there’s X amount of dollars in there. That’s what’s available for me.” It really isn’t because you’re going to owe taxes, you have to pay yourself and you have all these other expenses. So by splitting those amounts into the various accounts, then you’re just looking at that OPEX account or just looking at that payroll account and then you tend to just become a little bit more resourceful and look at your, know, the expenses that are coming out of there and say, “Do I really need this? Like how can I make these expenses fit into the amount I have allocated for that because that means that I can pay myself this much?”
[ALISON]: Yeah, and I think he uses a couple of different, like metaphors or analogies for that in the book, right?
[JULIE]: Yes. He also uses the toothpaste. That’s a popular one too, where like when you open a fresh tube of toothpaste you probably use a big piece of it on your toothbrush, but then by the time you get to the very, very end, like you can just squeeze that sucker and get several days out of it. So, he’s basically —
[ALISON]: Or just enough, right?
[JULIE]: — like, just making do and you’re going to make it last. So that’s kind of the power of allocation where you’re going to make it last, whatever’s left.
[ALISON]: Right. Yeah, because I think there’s definitely that, you know, like you said, when you go into your account and you look at that amount and you’re like, “Oh good, I have X number of dollars in here.” But what we don’t always think through is like, “Oh wait, but that money is already sort of like spoken for. It’s really for this and that and the other thing.” And so, we may then, when we are looking at expenses or maybe discretionary expenses, you know, optional things that we could buy, we’re like, “Oh yeah, we got plenty of money to do that, but we really don’t.” So, it’s sort of like having that money split out; is sort of like, you’re not tricking yourself, but you’re looking at a more realistic picture of like how much you actually have to spend on, maybe discretionary expenses.
[JULIE]: Yes. Well, the reality for most practices is that there’s a period in the month where there’s just more expenses. Typically, that’s the first 15 days. There’s a lot of private practice or group practices that pay once a month and so when that’s happening, the 31st comes and then next on the first you have, your rent is due and then you’re paying everyone maybe by the fifth. So, then you know that the cash in your bank account towards the end of the month is going to look really high, but then it’s going to be a really big low once you pay all those expenses. So, like being able to make sure you have enough for all of that is really great.
[ALISON]: Yeah, I think that’s one thing that I have just kind of struggled with as an owner is to sort of timing out like different payments and how the pay periods fall and it’s like, “Oh, I know money is going to cross in the bank today. I hope there’s enough there to cover everything.” Like, you know, obviously Profit First can help you get on a more consistent track with all of those things.
[JULIE]: And, we have a client who pays every two weeks. So that means twice a year, there’s a three-pay period month, and so having that payroll account, so in that case, like because it’s a large group practice, there’s a separate payroll account. So, having that, you know, every pay period, there’s a little bit accumulating in there so that those three payroll months, they’re not nearly as painful.
[ALISON]: Right. Yeah, that’s a good reminder. That’s how mine is.
[JULIE]: Twice a year.
[ALISON]: Twice a year. Oh, there’s three dates in July.
[JULIE]: It’s great for the employees. It’s not great for the practice owner.
[ALISON]: Right. So, when you see your clients start to implement Profit First, what kinds of changes do you see in the business in terms of just the finances or what the goals that the practice owner is able to achieve?
[JULIE]: Well, so usually when practice owners are implementing Profit First, there’s usually a goal in mind, right? So, either they want to be prepared for taxes because they had a big surprise or they really want to be able to bring home more. So, it’s that intentionality shift that can be really powerful in planning ahead. So, you’re being able to take out cash for profit and being able to pay yourself a reasonable amount. I think every practice owner deserves to have that. And so, this is a great way to start that if that’s not something that you’ve been doing or that you felt guilty about doing.
[ALISON]: Uh, yes, for sure. And then when people start to implement Profit First, maybe they’re, you know, doing it on their own, they’re not asking for help from a professional. What mistakes do you see them making?
[JULIE]: So not putting it on the calendar. When we support our clients through Profit First, we have two meetings a month scheduled on the calendar ahead of time so that we know exactly when we’re going to do these transfers. And then all the calculations are done for them already ahead of time so we’re just kind of having a check-in meeting, look at what happened, how the month went, like to see if we need to adjust anything. We give them a gentle reminder, “You remember, we were going to increase that profit percentage this month?” Like, “Oh, okay, yeah, yeah.” And so, we do that. But if you’re doing it on your own, I would say put it on the calendar to make sure that you are truthful for yourself, with yourself and that you are not borrowing from your future to pay for your present. Be intentional with the transfers.
[ALISON]: Sure, because if you’re just going in and like, you’re like, “Oh no, I don’t have enough to cover payroll,” and you’re going to borrow from another account, it’s like what, you know, you’re just robbing Peter to pay Paul.
[JULIE]: Yes, and you’re not addressing the actual problem with which is that your percentages were probably wrong. Like maybe you underestimated what you actually spend on payroll or what you actually spend on your overhead. and you’re, sometimes we can lie to ourselves about what is really going on. I like, I do that all the time at Target where I’m thinking like, I’m just going to buy one thing and then here we are, you know, $150 later. So, it’s really easy for that to happen, especially when you’re not looking at it closely. So, I love that Profit First is making business owners look at their financials on a regular basis.
[ALISON]: Yes. And that happens to me too at Target all the time, Julie. I was just there last night. Yep. That’s exactly what happened. I’m just going to get a few things and it’s like $150.
[JULIE]: Yes, you know shoes for the kids and all that.
[ALISON]: Yep. Yep. Yep. So why, like if you think people are underestimating their expenses, like how does that happen or like, what are some areas that people tend to not be realistic about or what do you see in that arena?
[JULIE]: Well, so if it already feels like there’s not enough money to cover the expenses, a lot of times they’re going to go to the bare bones as far as the budget and as far as allocating that percentage. But if you haven’t actually made any changes like you canceled any subscriptions or reduced any of your expenses or college, your comp, your internet provider to get a discount, just saying you’re going to make those changes doesn’t actually do anything. So sometimes you just end up with the wrong percentage.
[ALISON]: Right. So then would a good kind of step towards being more realistic with that be to actually go into your accounting software and maybe look at the last three months of expenses and actually add up? “Okay, what’s the average over the past quarter of what we spend on X, Y, Z?”
[JULIE]: Yeah, that would be a great idea. So I would look at last month, I would look at last quarter and last year and try to average those out a little bit because there’s some once a year expenses that you may be forgetting about and it was not a bad thing to have a little bit left in each account at the end of the cycle as a buffer for next cycle. And then those amounts just get bigger and bigger so that they can cover those one-time expenses.
[ALISON]: Uh huh. Yeah, I think it’s easy to forget about those for sure, especially with the insurance, which, you know depending on the size of your group, practice could be thousands of dollars that’s owed all at one time, right?
[JULIE]: Right.
[ALISON]: Yeah, and you’re like, “Oh, it’s October again. My premium is due. Oh no.” Yeah, I can definitely see how that happens.
[JULIE]: And so, another mistake I see often is that people will put money into the profit account, but they’re kind of afraid to take it out. Same can happen with the owner’s pay account. And really when you have funds in there, it’s permission to spend on yourself. So, if you have funds in the owner’s account, then you should not feel guilty about taking that money home and taking care of your family with it. That money is there for you. And same with the profit where you should let that money build in and then once a quarter take about 50% of that home to do something fun, like to reward yourself for having a profitable business. And that’s really fun to hear what people spend money on.
[ALISON]: Oh, nice. That’s probably gratifying for you, right?
[JULIE]: Yes. And really fun for them too.
[ALISON]: Yeah. And that’s a question that I hear quite often, like, if there is profit in the business that they can take out, like how often should they be taking that distribution? Just like every month, once a quarter, once every six months.? What do you recommend?
[JULIE]: Most of the Profit First method does say once a quarter. But what that means is that you should allocate it to yourself once a quarter. So if you’d prefer to then split that over the next three months just in order to keep a buffer of cash, some people feel more comfortable with that, you could do that where that amount might change so you’re always distributing something to yourself, but you’re just changing that amount once a quarter. Or if you have a big trip or a big expense coming up, you can take all of it out at once. But you would always want to keep something, you would always want to keep that 50% in your profit account because that becomes then a little bit of a rainy-day fund for the business too.
[ALISON]: Yeah, that was my other question. Is that then sort of like your emergency fund?
[JULIE]: A little bit. And Mike is very specific about if you’re using the terms, I’m going to reinvest it into the business, I’m going to plow back into the business, then really, you’re just hiding the profit. You’re hiding expenses as profit. So, but it could be used for something like a big buildout that’s coming up where you’re saving money over there and leaving it there knowing that you have big plans for that cash later on. But generally, it’s going to be for you as the owner.
[ALISON]: Okay. So, what happens if, as you know, our business can be somewhat seasonal? I think it’s typical for a lot of people to see that things tend to slow down in the summertime, especially. I know that’s true for us. Like what happens if those months are really lean or maybe you’re even like at a negative for though, you know, a month or two. Is that like, how does profit first I guess deal with that kind of cashflow issue or revenue issue?
[JULIE]: Right. Well, so this is, that makes this a really good time to start Profit First before the slowdown months of the summer where you would have built up already in the operating expense in the owner’s pay account. Like you would have some reserves in there that you could use during those slower months. The good news is that since payroll, your clinician payroll is typically the biggest expense. If the income slows down, usually that is going to slow down as well. So, that won’t be nearly as high, but then it does give you a little bit of a buffer for those slower months in the other accounts.
[ALISON]: Okay. So, again, that’s where you sort of have whatever you want to call it, an emergency fund or reserves there just in case that month you know, July or August or whatever is pretty slow and you’re not, no, you’re breaking even or maybe even lost a little money because you’re still having to pay the overhead but not as many clients are coming in?
[JULIE]: Right. And maybe in those months you’re reducing your percentage on profit. Here that could be an option too where you might not be able to do 10% profit on those months, but at least you’re still allocating something intentionally.
[ALISON]: Right. Any other tips you have for us about Profit First or you know, something specific to group practice owners with using Profit First in their business?
[JULIE]: So, I love to support your practice owners with Profit First I would say, “Look at what the financials are telling you and start there as a starting point and then just set yourself up for success with Profit First.”
[ALISON]: Nice. And I know that’s one of the services that you offer in your firm.
[JULIE]: It is.
[ALISON]: Yeah, so if you could tell us a little bit about how people could get in touch with you in case, they want to maybe have you help them set up Profit First in their practice, how can they contact you?
[JULIE]: Yes. So, we do Profit First setup and ongoing profit for support as well. And you can find us at There, you can sign up for a free consultation to find out more about our services. You can also sign up for five days of profit boosting tips and a lot of our different Excel and Google sheet templates.
[ALISON]: Awesome. And are any of the templates and giveaway things related to Profit First?
[JULIE]: We do talk about Profit First in the profit boosting tips, yes.
[ALISON]: Oh, very nice. Very cool. Well, Julie, I want to thank you so much for doing this four-part series with me. I know it was a lot of talking and time on your part and I really appreciate you sharing your knowledge with the audience. It was helpful for me as well. So, that’s an added bonus and I hope we can have you back again on the podcast sometime to talk some more.
[JULIE]: It was good. Thank you for having me for your first series.
[ALISON]: Yeah, thanks Julie. Well, I hope you got some ideas about how you can implement Profit First into your private practice. I think that one of the cool things about Julie’s firm is that she actually does help people implement Profit First if that’s something that they’re interested in doing. I know, especially when you have a group practice the financial part could feel like there’s a lot of moving pieces and it can be hard to know how to implement all of that, especially when you have staff and you have so much money coming in and out all the time. So definitely check out the book by Mike Michalowicz of the same title, Profit First. Or if it’s something that you’re wanting some help with, of course Julie’s firm Green Oak Accounting can help you as well.
So, I really hope that you got a lot of value out of the four-part series that we did, talking all about money. I think it’s so important to have a handle on your finances in a group practice to make sure you are paying yourself well, to make sure you’re profitable. And I hope to have more episodes in the future about money and finances in group practice because I think it’s something that you know, we haven’t necessarily gone to school for or feel that comfortable with, but in order to be successful business owners, we definitely need to keep an eye on our finances. So, hope everybody is having a great day and I’ll talk to you later.
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