Effectively Managing Variable Cash Flow: The Power of ProfitFirst™ System for Self-Employed Relief Veterinarians

Self-employed relief veterinarians often grapple with the challenge of managing unpredictable cash flow, which makes it difficult to plan for taxes and expenses, save for emergencies, and achieve financial stability. However, the ProfitFirst system offers a solution that empowers relief veterinarians to take control of their finances and establish a solid foundation for long-term success. In this article, we will delve into the ways in which the ProfitFirst system can assist self-employed relief veterinarians in effectively managing their variable cash flow, drawing on real-world examples to highlight its practical benefits.

Understanding the ProfitFirst System:

Developed by Mike Michalowicz, the ProfitFirst system is a financial management methodology designed to prioritize profit and enhance cash flow management for businesses. It advocates for allocating a percentage of revenue towards profit, ensuring consistent profitability even during periods of fluctuating income. By providing a clear framework for income organization, expense management, and informed financial decision-making, this system equips self-employed relief veterinarians with the tools they need to succeed.

Example: Relief Veterinarian, Dr. Sally Jones:

Let’s consider Dr. Jones, a self-employed relief veterinarian who frequently encounters income fluctuations. Prior to adopting the ProfitFirst system, Dr. Jones struggled to set aside funds for taxes, savings, and personal expenses. Consequently, she often found herself living paycheck to paycheck, plagued by financial uncertainty.

Upon implementing the ProfitFirst system, Dr. Jones started allocating a predetermined percentage of her earnings to different accounts. She established separate bank accounts for profit, taxes, owner’s pay, and operating expenses. For instance, Dr. Jones decided to allocate 5% of her revenue to profit, 15% to taxes, 50% to owner’s pay, and 30% to operating expenses.

With this system in place, Dr. Jones witnessed transformative changes in her financial situation. She accumulated reserves in her tax account, ensuring she had sufficient funds to meet her obligations when they arose. The consistent income from the owner’s pay account covered her personal expenses, instilling a sense of stability. Moreover, the profit account served as a reward for Dr. Jones’s hard work, enabling her to invest in professional development and foster business growth.

No more struggling to find money when estimated quarterly taxes or business credit cards are due since these expenses are being accounted for in their respective accounts when income is received. Whether the income received for the specified period is $10,000 or $20,000, the ProfitFirst system allocation percentages helps to ensure each account is adequately funded for its purpose. Take a look below for a graphical representation of Dr. Jones receiving $10,000 in gross revenue, and where each dollar earned is going

Now, you may have questions about how to set these allocation percentages. And truth be told, it will be a work in progress for a few iterations and something that should be monitored and adjusted as necessary. The ProfitFirst system refers to these as current allocation percentages (CAPs) and target allocation percentages (TAPs).

Current allocation percentages refer to the current distribution of funds across various accounts in a business. These accounts typically include Profit, Owner’s Compensation, Tax, and Operating Expenses. The current allocation percentages reflect how much of the business’s income is currently allocated to each account. This will take some initial self reflection and understanding of your relief vet business to set up.

Target allocation percentages represent the desired distribution of funds across the different accounts. The target allocation percentages are based on the financial goals of the business owner and provide a roadmap for achieving those goals. They often involve allocating a predetermined percentage of income to Profit, Owner’s Compensation, Tax, and Operating Expenses.

For example, Dr. Jones examines her current financials and determines her current allocation percentages. Let’s say her current allocation percentages are as follows:

Profit: 5%

Owner’s Compensation: 35%

Tax: 15%

Operating Expenses: 45%

After she establishes her financial goals she decides on the desired distribution of funds. Let’s assume she wants to increase profit and owner’s compensation while maintaining her tax but reducing her operating expenses percentages. She sets her target allocation percentages as follows:

Profit: 10%

Owner’s Compensation: 50%

Tax: 15%

Operating Expenses: 25%

Dr. Jones will regularly monitor her finances to track progress towards her goals. If she finds that the current allocation percentages are not bringing her closer to her targets, she can reassess and make further adjustments as needed. This may involve modifying her pricing, reducing expenses, or finding ways to increase revenue.


The ProfitFirst system equips self-employed relief veterinarians with a practical solution to effectively manage variable cash flow. By allocating a percentage of their income to designated accounts, relief veterinarians can prioritize profit, ensure the fulfillment of tax obligations, and enjoy a consistent owner’s pay. Real-world examples of Dr. Jones demonstrate how implementing the ProfitFirst system provides financial stability, facilitates business reinvestment, and eliminates the stress linked to unpredictable income. By embracing this methodology, self-employed relief veterinarians can gain greater financial control and establish a solid foundation for their businesses. The ProfitFirst system empowers them to navigate the challenges of variable cash flow, ensuring profitability, meeting tax obligations, and achieving personal financial stability. By adopting the ProfitFirst system, self-employed relief veterinarians can pave the way for long-term success, effectively managing their finances and thriving in their professional endeavors.

For those interested in this system, I highly recommend reading the book by Mike Michalowicz which can be found on Amazon. There are also YouTube videos highlighting some of the key points which can help visualize how this system would work for you.