You Implemented Profit First…What’s Next?

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If you’ve recently implemented Profit First, congratulations! Now that you’ve figured out your percentages and set up your bank accounts, do you simply leave things as they are? Rob and Wade explain the long-term strategies and benefits of Profit First on this week’s information-packed episode.

Topics we cover in this episode include:

  • Why you should revisit your Profit First percentages every quarter 
  • How cutting expenses, analyzing clients, and systemizing your business factor into the long-term Profit First method 
  • Wade’s results after using Profit First in his business for three years
  • How Profit First helps you add meaning to your money and achieve lifestyle congruence
  • How initial wins with Profit First provides momentum for further success


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Rob Williams, Profit Strategist |
Wade Carpenter, CPA, CGMA |
Stephen Brown, Bonding Expert |


[00:00:00] Rob Williams: Welcome to the Contractor Success Forum. Today, we are talking about things that we do after Profit First is in place. At the Contractor Success Forum, we discussed financial strategies for running a more profitable, successful construction business. 

And we have in one corner, Stephen Brown, the construction bond agent with McDaniel-Whitley bonding and insurance agency with over three decades of experience underwriting and placing bonds. It’s amazing. If a 30 year old, he started at birth!

And in the other corner, we have Wade Carpenter with Carpenter and Company, CPAs helping contractors nationwide to become permanently profitable, also for over 30 years.

And I am Rob Williams, your profit strategist with IronGate Entrepreneurial Support Systems, driving profit in your businesses with decades of vertical integration as a contractor, manufacturer, aviator and financial strategist in the construction industry.

So guys, what do we do, Wade, after we put Profit First in place? Or Stephen, wait a minute, may be even better. Stephen, have you ever wondered what we do?

[00:01:17] Stephen Brown: I really do. A lot of people in the surety industry, trying to educate them and contractors on the idea of business coaches, but it’s not just a business coach. It’s a plan that you buy into that’s very successful. And a lot of accountants like you, Wade, are sold on this being a great method of teaching people how to run their business. So yeah. What do you do, guys? If someone wants your services, they want coaching, they want to take their business to the next level. What do you do?

[00:01:46] Rob Williams: Or they, or they want a profit strategist.

[00:01:50] Stephen Brown: Well, I know you love saying that and, you know, I’m sure it gives our listeners goosebumps, but you know, wondering what a profit strategist is.

[00:02:00] Rob Williams: Oh,

[00:02:01] Stephen Brown: Yes. Great question. Let’s let’s start there. What is a profit strategist? Wade?

[00:02:08] Wade Carpenter: Well, I know, maybe Rob and I have different definitions of…

[00:02:12] Stephen Brown: I’m sorry, maybe I should have asked Rob what a–

[00:02:14] Wade Carpenter: Well, yeah. But but you know, as far as like today, a lot of people will put Profit First in place and they’ll set the numbers and they’ll set their taps and whatever, and they stick with it and they think they’re supposed to stick with those percentages forever.

And honestly, every quarter you should be taking a look at those percentages. And a lot of people forget that sometimes it takes a year and a half to two years to really get your numbers where they need to be. Every quarter you should be looking at that, but it’s also, I use it for looking at like, where have I gone? What’s my strategy going to be? And especially at year end, that’s the time to take a real hard look at what are we doing and what should we be doing differently?

[00:02:58] Stephen Brown: A lot of people have December 31st year-end financial statements, and December 31st, when we’re talking about year end, is the time to start measuring these things, isn’t it? 

[00:03:12] Rob Williams: Yeah, 

[00:03:12] Stephen Brown: What do you do with a new client?

[00:03:14] Rob Williams: Well, we’re, I’m thinking about there’s different times of year, we’re thinking about the end of the year right now, but really what I was thinking about when you have it is you, you get their numbers and you get the whole Profit First in place, so they can start seeing what it is they need to do.

And that’s great. And that people think that’s the whole thing, but really that’s the starting point. And you do, yeah, we go through the things like efficiencies and cutting expenses and looking at all that, but that’s still kind of the first spot then you kind of run out, but then we start looking at things like, what is their sweet spot? What is their niche? 

So we do sales analyses of their clients and ranking them under a bunch of different factors and it’s not always the same. But a lot of times, you put the revenue and maybe the cringe factor. Are there clients out there that you just don’t want? You just cringe every time the phone rings? And how much is that costing you in overhead in the rest of your organization or your just mental dealing with things and your mental effort with that client. So we rank those. And we look at that and we look at, you know, where do those align with your unique offerings? 

So first you rank those and you try to get the most profitable clients. And then you kind of prune the vine of the ones that are really destroying your profits, that are taking up all the resources for the least amount of revenue and gross profit in the middle.

Cause a lot of times it’s not just that gross profit line. It’s all the things that don’t go into job cost and commercial contractors tend to allocate a lot of their overhead to things. So they might have a better perspective, but a lot of companies just have all of their expenses in the expense category, which is a huge part, and their gross margin does not really reflect the true cost of the job.

So you look at all those indirect costs non-commercial contractors don’t ever allocate to the jobs.

And then, you look at that, you look at your unique offerings, what is it that makes you unique? And you systematize your systems around that unique offering.

That was a real quick outline of what we do, the way I look at it. So there are a lot of other things, you know, know, I’m not the CPA, the bookkeeper, so we have a little different way of looking at that. Boy, I went through that really fast.

[00:05:33] Wade Carpenter: I got some thoughts on that too. But Stephen, if you want to comment on anything he said? 

[00:05:39] Stephen Brown: I was just going to say, a lot of times when you’re working. You just don’t realize how those bad clients of yours are affecting you. And when I fire a bad client, they just jump on my back and they’re hugging my neck and they’re saying, I’ll never let you. I’m saying, yes. Yes, you will. Yes.

And having someone else help you sort through that is a big plus, but it’s all about honing that sweet spot, isn’t it?

[00:06:06] Wade Carpenter: Yeah.

[00:06:06] Rob Williams: It is so, so how can you be more efficient and handle many, many more of your best clients? And then you’re usually doing them a favor because there’s probably a reason that they’re your worst client. They’re probably a best client for somebody else in the way their business structure is formed, that that’s a better fit that client. 

[00:06:29] Wade Carpenter: Yeah. For me, Rob brought out a ton of points on, what he’s talking about–

[00:06:33] Rob Williams: Yeah. Bullet–

[00:06:34] Wade Carpenter: I think we can kinda talk about . Several of those things, but I wanted to kind of spend a few minutes, cause I’m in my third year of doing Profit First and we recently came through it, we did our year end planning podcast a few weeks ago and I’m here looking at my numbers for, it’s in November right now.

I actually, I went through my recertification process with Profit First. And part of that was I had to do a profit assessment on my own business. And obviously I know what the percentages I’ve brought them up to, but when I put the numbers in there, it was amazing to me. For 20 years I’ve reinvested everything back into my business.

Now I’ll look at the profit and I, I do have some things to, you know, we’ve, we’ve added two new team members this year. I’ve increased my take home pay quite a bit. One of the things that I’m really proud of is that I’ve had this home equity loan that, we did some improvements on my house about 15 years ago.

And paid the interest or just a little bit above that. And it was sitting in $65,000 at the beginning of the year. I’m paying that thing off, this month.

It’s just stuff like that. That just makes me feel really good about finally taking the profit that I’m deserved.

And for the first time in my life, I’m also gonna fully fund my retirement plan for this year. And so, that’s where I’ve every year, every quarter I try to take a little different look at it, but I’m sitting here sitting down and saying, what am I doing different next year? Some of the things Rob talking about, like pruning clients, you wouldn’t believe how yes, it seems like you’re, I’m going to lose some revenue, but when you pick it up and you replace it with some great new clients that can make a huge difference. And, I’m going into next year with four months of operating cash in my bank, and I’ve never had that. And it’s a completely different turnaround and I know it feels great.

And I also have been revisiting this with a lot of my clients and we started them on these got them on the path of Profit First, but maybe they, for whatever reason they did their own thing. They set their percentages and they haven’t touched them since. And for me moving these percentages every quarter, looking at it, it’s that’s changing my strategy.

So, that’s a long-winded answer, but, number one become very motivating. When you’re winning, it’s very motivating. And so that’s what I want to talk about.

[00:09:03] Stephen Brown: That’s a great answer, Wade. It really is. What’s the purpose of doing anything, if you out measure it and see results from it? That’s a hard thing to do on your own, I think. 

[00:09:13] Wade Carpenter: Yeah, you get tunnel vision. And I look after everybody else’s stuff, but sometimes you got to sit down and look at your own stuff, and sometimes it takes somebody else Hey, you, you have accomplished something. We’re paying, I could go on, but you know, like our tax software, a couple $20,000 a year, usually I’m paying that in arrears. We funded next year already.

We’ve already paid for it in advance. 

[00:09:37] Stephen Brown: It’ll be 30,000 next year but that’s great. 

[00:09:41] Wade Carpenter: Well, that’s true. So I’ll shut up. But I do think that, I’d love to kind of explore some of the things Rob jumped into.

[00:09:47] Rob Williams: No, you made a great point. And I do tend to a lot of times start talking about the tool instead of what they’re accomplishing, because yeah. I just wrote some notes in the– adjusting the percentages. Yeah. I don’t want to skip over that. That’s the big thing, I guess when you’re implementing Profit First. Yeah. What Wade is talking about is, is better for us to talk about because that’s why you’re doing these things. That’s the whole point of it. The point of it is not to change your customers and in prune and get the systems in place. The point is to adjust the percentages and put more money in your pocket. That is exactly it. 

And those are the why’s you do that. And so I like that Wade started with that. That makes a lot more sense. And yeah, paying yourself, and Wade’s going way ahead now, but in those first ones, are they paying their taxes? That’s usually the big, first thing.

It’s either they’re paying themselves or they’re paying their taxes. That’s the big, first thing that you’re trying to get at once you put Profit First in place and the plan. Yeah. It’s not to do those other things. I said it is to get that objective done that that client wants. That’s what you need to put first.

I’ll say it again, pay your taxes in advance as you get the money with the money that you earned, not with next year’s money, that’s usually the first step. And then bring that money home to yourself instead of reinvesting it in the business, which we know that’s really just an expense.

It just sounds better when you say re-investing it in your business.

[00:11:26] Wade Carpenter: It is my third year of doing this, I guess I forgot that point. I’ve already got my taxes paid for next year and I’ve got more money in the tax account than I need. And so, stuff like that, it’s a burden I took off my plate two years ago when I first started Profit First.

And I guess I forget some of those intangible things, but you know, I’m not waiting to see if there’s cash in the bank for me to take a paycheck home. And me take the leftovers and I’ve said it before, a lot of my contractors on here, sometimes their receptionist takes home more money than they do.

And it’s sad.

[00:12:02] Rob Williams: You know, one of the other points that Wade just alluded to, but I like to call it adding meaning to your money, or lifestyle congruence is one of the drills that’s not really in Profit First, but it sort of is mentioned. And I like to go there, is taking the formula of doing your personal budgets and figuring out how much money do you really need to have and where would that money go?

And that is one big thing that I’ve been doing for myself this year, Wade was just talking about that is, I’ve got it all prioritized down and then I’ll know, first where I am, and then what revenue do I need to make to bring this much home? I’m looking at it at a weekly and a monthly basis, even after I look at the annual to see how much that is, I need to manage. And that’s how much revenue I need to get. 

I can’t believe that I didn’t know how much revenue, if I made the Profit First percentages, how much revenue I even need to bring home. Because what, what is your target revenue? Because I think it might even be a hundred percent of the people. Wade, I don’t know about you, that they all have a goal and it’s always a revenue goal and it ends in six zeros somewhere. It’s either one or 2 million or 5 million or 10 million, and it’s not a profit goal. It’s not a goal to bring home. So I know for me this year, my big transition has been to have a take-home pay goal is the most important thing, which is a different way of saying profit, but profit on a tax basis is different than take home pay.

And so having that take home pay goal, and then where does your business need to be? So you’re really adding a lot of meaning to the goal. And when I’m getting that, I feel like I’m rambling a little bit, but the point was, I always had some ego goal for my revenue. And then when I got in the middle of the year, things would happen and I wouldn’t make it.

This was when I was in construction and manufacturing. It just didn’t, it’s like, okay, well, I don’t know why I picked 15 million or 10 million or whatever, it’s just a random goal. So it didn’t really mean anything when we weren’t making it other than it was a company goal on a piece of paper. 

So having that goal mean that you can’t pay for your kid’s school or you can’t do these other things and you know where you are with that, and when you have the increase, it may mean what Wade’s saying, fully funding your retirement accounts or your retirement plan. I think that that’s where I’m, I’m looking at it. I need to put more into that phase of mine right now.

So I’m trying to push that. I don’t think people realize that we look at that stuff as a Profit First Professional. They just see these first goals, but we really try to add meaning to that and make that lifestyle congruence. That’s the word that Mike uses. Is your business congruent with your lifestyle and are they matching each other, your personal goals and your company financial goals in alignment with each other? Did that mean anything, Stephen?

[00:15:09] Stephen Brown: Yeah. Well, to me, it’s all about bling. You know that. And living lifestyle of the rich and famous.

[00:15:16] Rob Williams: Yeah, baby!

[00:15:17] Stephen Brown: So, yeah. know,

[00:15:19] Rob Williams: Caviar dreams or wishes. What was that show?

[00:15:22] Stephen Brown: Backwards from there. No you made some really good points and I appreciate it. Cause I feel like I’m the Profit First outsider when I’m with you two. And it’s important to me, as passionate as you are, and the feedback you’ve gotten from your clients about how you’ve been able to help them.

I think it’s important that people understand what’s out there and what’s available for them.

[00:15:44] Wade Carpenter: When you feel like you’re winning, you start momentum and it builds. And we talk about when you’re first trying to get kicked off, you’re cutting expenses and you try to figure out how in the world can I do that.

Once you got the cash in the bank, I talked about paying the software early. Well, I saved $2,000 overall next year doing that. And not to mention a lot of other fees, that there was some other stuff that some payroll software, stuff like that, that we paid ahead. And I’m probably going to save about $7,000 by doing that next year.

[00:16:21] Stephen Brown: Wow.

[00:16:22] Wade Carpenter: I really hate to say it this way, but when you’ve got cash, you can take advantage of opportunities you’ve never had before, or you never thought. Because this time of year, a lot of my contractors are thinking, not just how can I take something home for my pay for Christmas, but how am I going to pay my employees’ bonuses? They deserve a bonus this year. We’re scraping and scrapping just to come up with that bonus money. And so it’s really nice to sit there and say, I’ve got some money in the bank. What can I do? Whether it’s going to put it in marketing and you got a little extra time was like, say, where have I been spending my money and where, what have I been going after?

And it quite frankly is kind of nice that– we like to say we like all our clients, but not all of our clients are good clients. Sometimes we have bad clients. And sometimes it’s a little bit satisfying, if I can say that on the show, to get rid of some of these bad clients.

[00:17:17] Stephen Brown: Your time is money.

[00:17:20] Rob Williams: One thing that you just said there, Wade, it’s interesting. You identify who were the good clients and who were the bad clients in terms of business. Because some of them it’s actually, I can think of one client that was one of my favorite clients, but business-wise, it was not a good client. It was not a good thing.

I was definitely using all my resources. And going after that and not charging more and more, maybe it’s because I did enjoy that client. I liked that client a lot and I spent probably more time, we were really good friends and did those things. But in terms of a business proposition, if I went back and looked at the hours I spent, it was less than McDonald’s pay. I need that $15 an hour raise to get to that point. So there’s, there’s good clients and bad clients, and then sometimes it doesn’t match. Well, it’s opposite of the cringe factor sometimes. So can you change that relationship or does it have to go? 

[00:18:17] Stephen Brown: Well, as far as getting started with some coaching and with some help, they say, when’s the best time to plan on oak tree? And it’s 20 years ago. And when’s the second best time to plant an oak tree is right now. So I think that’s a good way of looking at it.

You can talk about woulda, shoulda, coulda all day long, but right now, what can you do today? So we’re hoping our listeners can get upbeat about this and get excited about the future and that’s what we’re all about.

[00:18:48] Rob Williams: All right. Well, did this help, Stephen, we’ll use you as– did this help give a little bit more of a clear picture?

[00:18:55] Stephen Brown: I just want to start a construction company so I can hire you guys, but I thought it was fantastic. I think it was some good information that people need to know.

[00:19:05] Wade Carpenter: Yeah.

[00:19:06] Rob Williams: Wade, you got?

[00:19:07] Wade Carpenter: Yeah. I also would tell you anybody on here, there’s a lot of people that we talk about Profit First and not everybody buys into it. I know Stephen said something about accountants. Accountants are the biggest ones that say, this is horrible. If you go on Amazon and say, this is stupid and this doesn’t work well, I’m here to tell you it does work.

So if you’re a contractor on this thing reach out to one of us. A lot of people say I’m too far in debt. I’m in the hole, now. I can’t take 1% profit. Well, it’s got to start somewhere. Exactly what Stephen was saying. You got to start somewhere. And once it builds up momentum, look out.

[00:19:50] Rob Williams: Yep. That’s great. Wonderfully said. 

All right. Well, this has been a wonderful episode of the Contractor Success Forum. And if you liked the show, go rate us. And it actually, that will help us out a lot. If we want to get the word out to other people the best way you can thank us is to rate the show. If you can figure it out. And Stephen, that was hard to figure out wasn’t it, the other day? You got to go all the way down.

[00:20:19] Stephen Brown: You go to our like Apple Podcast link and then scroll down the bottom where, it’s almost at the bottom, it’s kind of right up near the bottom and it says “Rate Us”.

[00:20:29] Rob Williams: Yeah!

[00:20:30] Stephen Brown: It’s a simple process. You’re not going to get 15 surveys by rating us, and we’re not going to spend two hours of your time, but we would appreciate it.

[00:20:41] Rob Williams: Alright. Well, thank you guys. And we are the Contractor Success Forum, and we have Wade Carpenter, Carpenter and Company, CPAs. And Stephen Brown with McDaniel-Whitley bonding agency. And I am Rob Williams, ironGate Entrepreneurial Support System.

If you want to get in touch with us, look at the show notes. We have a webpage Contractor Success Forum dot com. Thanks for being here today, and we’ll see you next time. 

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