Profit First Pt 3: How to Set Up Profit First in Your Law Firm for Better Cash Flow (Ep. 151)

Jan 27

If you're a law firm owner, you've likely felt the stress of unpredictable cash flow, growing expenses, and the pressure to increase revenue just to keep up. What if you could flip the script, boost profits, ease your financial anxiety, and build real wealth without chasing growth for its own sake? That's the promise of the "Profit First" method, and it's a game-changer for lawyers serious about financial success.

Let's break down exactly how you can set up Profit First in your law firm, based on actionable advice from Darren Wurz on The Lawyer Millionaire Podcast.

What Is Profit Firstand Why Should Law Firms Care?

Profit First is a proven financial system that helps business owners take their profit upfront instead of hoping there's money left over at the end of the month. Instead of focusing only on revenue, this method ensures profitability is built into your operations. As Darren Wurz explains, it's about making simple, structural changes in your cash flow—not just hoping for better discipline or a magical growth burst.

If you answer yes to wanting...

More profit this year (10%, 20%, even 30%)
Paying down debt or your mortgage
Staying out of credit card trouble
Reducing your stress about money

...then Profit First is for you.

Step-by-Step: Setting Up Profit First in Your Law Firm

Create Five Foundation Accounts
These bank accounts each serve a designated purpose. Here's how they work:

Income Account:
All business revenue lands here first. This account acts as a conduit—you never pay bills directly from it.
Profit Account:
Before anything else, transfer a set percentage of income (start with 1%, then increase over time) into this account. This is your reward for taking the risk of business ownership. At the end of the quarter, use it to pay down business debt or, if you're debt-free, consider bonuses.
Owner’s Compensation Account:
Pay yourself from this account regularly—don’t rely on leftover operating cash. The target for firm owners is 25–30% of gross revenue. This separation protects both your personal assets and firm liability.
Tax Account:
Set aside a percentage of all income for taxes (match last year’s effective tax rate; often 15–20%). Pay quarterly estimates diligently so April doesn’t become a financial nightmare.
Operating Expenses Account (OPEX):
Run your firm on what's left after allocating for profit, owner’s pay, and taxes. This forces you to operate efficiently and control spending.

Bonus Tip: Add an Emergency Fund.
Many law firms overlook this, but having a business emergency fund can save you from cash flow interruptions—and prevent costly credit moves.

Set Up Two ‘No-Touch’ Accounts at a Separate Bank
Every so often, transfer the money in your Profit and Tax accounts to savings accounts at a completely different bank. Make these funds harder to access—removing temptation prevents accidental overspending.

Simple, Sustainable Profit—No More ‘Lawyer Math’

This method takes you out of the "growth trap," where revenue goes up but profits shrink—or disappear. Instead, you’ll have instant, accurate clarity over your true financial position, and end the cycle of justifying expenses in hopes of new client windfalls.

With Profit First, you take a percentage off the top for profit, pay yourself first, and automate tax savings. What's left

Resources:

Connect with Darren Wurz:

Transcript:

Darren Wurz [00:00:00]:

What exactly is profit first and how does it work? Today, I'm giving you the system and showing you how to set it up. If you make five simple changes in your cash flow, not your mindset, not your growth strategy, your cash flow will become clearer, your profits will increase, and your stress level will drop almost immediately. Hey, friend, welcome back to the Lawyer Millionaire podcast. I'm really excited that you're here today because today we're going to be talking about profit first and not just talking about it. I'm going to show you exactly how to set it up and how to set it up successfully from the beginning. Go big or go home. If you're going to do this, go all in and do it right the right way. So let me ask you a few questions before we jump in, just to set the stage.

Darren Wurz [00:00:46]:

Do you want an extra 10% of profit this year? 20%? 30%? Do you want an extra 10,000? 50,000? 100,000? Do you want to pay down your mortgage without feeling guilty? Kill your student loans? Stop floating your lifestyle on your credit cards? Well, guess what? If you answered yes to any of those questions, profit first is for you. That's right. It's for you, my friend. It's going to be the thing that saves you. Profit first starts with profit and reverse engineers your business. And so that's what we're going to do today. I want you to bookmark this episode because I'm going to walk you through it. Later on when you're back at your computer, you can come back, you can listen, I'll walk you through it again.

Darren Wurz [00:01:28]:

I'll show you exactly how to set it up. So today we're giving you a rundown of profit first, one on one. And, you know, inside the Lawyer Millionaire community. This year our theme is profit on purpose because profit is fundamental. And in this first quarter, we're focused on profit systems anchored in the book Profit, Profit first by Mike Malitz. Because this year we're done chasing growth for growth sake. We're going to maximize profitability, period. If you want to join us inside the Community for our masterclass events and so much more, just go to community.lawyermillionaire.com the link is in the show notes.

Darren Wurz [00:02:10]:

So a couple episodes ago we talked about first episode in this series, we talked about the growth trap. We're all chasing bigger, bigger, bigger, more and more and more revenue, top line revenue. And that focus can be a problem because if we're not focused on profitability, it's very, very common and very easy to see revenue go up and profits go down. And that's bad because that means you're making less money and you're more stressed. Who wants that? Okay. All right, so. And then last time we talked about the mental traps that sabotage our cash flow. And this proves to us that we can't do this just by thinking we're gonna do better.

Darren Wurz [00:02:55]:

You know, many business owners, many lawyers think especially around this time of year, right? It's New Year's. We've set our resolutions. Maybe yours is still stuck or have your resolutions faded by now? I don't know, maybe. You said, coming into this year, you know what? I'm going to be better about my cash flow and my business this year. How you doing, friend? And we all say, oh, you know, I'll be better next year. And the longer the year goes on, the easier it is to say that, right? You know, because like, oh, this year's a wash. Let's not. Let's not do that.

Darren Wurz [00:03:26]:

Let me ask you something that might be a little bit uncomfortable. If you haven't handled your cash flow well so far, what evidence do you have that future you will suddenly become disciplined? Hmm. You don't need more willpower. You need structural changes. And profit first can make the difference for you. It can be the difference between a year where you finally are in control of your money and you actually have money left over. Hey, to throw in your retirement account or pay down those student loans or those credit cards or whatever it is. Or it could be the year where you make great money and still feel broke.

Darren Wurz [00:04:08]:

And that's what we don't want. Profit first can make the difference between smart financial management and what I lovingly call lawyer math, which is justifying not so great spending with optimistic assumptions. And by the way, it's not just lawyer math. It's generally business owner math. And it goes something like this. Well, if I get one more client from this, it'll pay for itself. Have you ever said that to yourself, friend? But will it really? Or will you get that one client, upgrade your lifestyle, expand your expenses, and still have nothing left over? Okay? And you know that one new client, we always think, oh, one new client is going to get me X amount of dollars. Well, no, because that's top line thinking.

Darren Wurz [00:04:58]:

That's revenue thinking. And revenue is not success. Profit is success. And you need it now, not someday. You know, I've been doing profit first in my own business for over two years now. And let me tell you something, when I started doing it, it was life changing. I don't stress, I do not stress about my cash flow at all. I used to keep track of very meticulously in an Excel spreadsheet.

Darren Wurz [00:05:25]:

And this is good, you know, if this is a great place to start. I would forecast out my expenses and my, my revenue and things like that. And it was very helpful. But it was a lot of work and I was constantly doing it and constantly afraid. Profit first really helped. Okay, enough chit chat. Here's how you set up profit first. Okay? In the profit first system, you have five accounts, five foundational accounts.

Darren Wurz [00:05:53]:

The first account is your income account. Then you have a profit account, an owner's compensation account, a tax account and an operating expense account. The basic idea is that we are going to subdivide all the money that comes in into different buckets for different purposes so that there's money there when we need it. And okay, so let's just go through them. The first one is the income account. The income account is where everything comes in. It is the account that's going to receive all of the income, okay. All of the revenue lands here first.

Darren Wurz [00:06:33]:

You can freely give out this account number and routing number to anyone who pays you. Well, I wouldn't suggest that I'm being facetious, but because it's actually safer this way because you, you know, if anybody gets this information and tries to steal all your money, well, there's not going to be any money in that account because everything that flows into that account very quickly flows out of that account and into four sub accounts or four other accounts. Now these are all checking accounts, by the way. You want to set these up probably as checking accounts. Now there is no spending from the income account ever. Okay? Its only purpose is a conduit. The purpose of the income account is to make money flow into the four major accounts, okay? Now the first major account is the profit account. It is first, hence the name profit first.

Darren Wurz [00:07:28]:

This is the first account that money flows into. Okay? And we're going to take our profit first. You're to going your profit account is your reward for owning your risk. This is where you get to have dessert first. You know, funny story, my dad and I used to go out to eat when I was a kid and it would be so fun. We would go to a restaurant, we would sit at the counter and we would have dessert first. Oh yes. I don't know if my mom ever knew that, but this was how we would spoil ourselves.

Darren Wurz [00:08:02]:

You know, no vegetables here. Let's have dessert first. Well, in the profit first system, you get to have dessert first. You get to get your profit up front, not wait till the end. So you're going to decide right away off the top. We're going to take profit instantaneously. Now, what amount should I start with? How do I know how much profit to take? That's the question right now. You know, you probably to have a healthy business, you really want to get to 25, 30% in profit.

Darren Wurz [00:08:36]:

But if you've been struggling with profitability, and likely you have, which is why you're looking into the profit first system or tuning into a podcast about cash flow, you're probably not going to want to start with 20%. So I suggest, and Mike McCallowitz suggests in his book starting with 1%, okay, you won't miss it. You won't miss it. If you take 1% of everything that comes in and you set it aside in your profit account at the end of the quarter, you'll be pleasantly surprised to have a small amount of a modest amount of profit set aside. Wow, look at that. And then you get to choose what to do with that profit from that profit. Well, there are some things you should probably do first. You should probably first use that money to pay down debts.

Darren Wurz [00:09:31]:

Okay? If you have accumulated debt in your business, now's your chance. You're going to be setting aside money to pay down those debts. If you've paid down the debt, then this can be the account from which you pay yourself a bonus or pay your employees a bonus. Now, this is not technically your rainy day fund. It can function that way. I suggest that it doesn't. And I would suggest maybe adding an extra account to the profit first system, which would be an emergency fund. It's so important for businesses to have an emergency fund.

Darren Wurz [00:10:06]:

I talk to so many law firm owners all the time who have no business emergency fund. Maybe they have a personal emergency fund. Maybe if they're lucky. Are you lucky? Do you have an emergency fund for your personal side and for your business side? You need to have a business emergency fund. It's so critical because then if cash flow gets interrupted, you're not going to be tapping into the line of credit to keep your cash flow going anyway. So 1 is income, 2 is profit, 3 could be emergency fund. That would be one modification I might suggest to the profit first system. Although your profit account could function that way and it should be slowly accumulating amounts, you're accumulating larger and larger amounts of profit.

Darren Wurz [00:10:58]:

But if that's difficult, and I think I like the subdivision of having separate purposes right let's have two. But anyway, if you want to keep things simple, just keep one, keep it the profit account and use that to build up a profit emergency fund buffer. Now, number three is the owner's compensation account. Oh, this is the one that most law firm owners don't have. And you need one. Let me tell you why. The owner's compensation account is the account that you're going to pay yourself for from. You should not be paying yourself from the operating expense account.

Darren Wurz [00:11:37]:

You need to prioritize paying yourself. Pay yourself a regular automatic scheduled paycheck. Now, I don't care if it's W2, if it's draw, it's 1099, whatever the hell it is, make sure that you are paying yourself a regular. Same exact dollar amount should be flowing from your business to your personal accounts on a regular basis. Once a month, twice a month, once a week. Whatever it is, set it up on autopilot. I get this question all the time right now. It really helps when you become an S corp because you're going to have to run payroll.

Darren Wurz [00:12:22]:

Although you would be surprised. I've had some clients who wait until December 15th to run payroll for the entire year. Don't do that crap. Pay yourself regularly throughout the year on time. Then you can, that will, oh my gosh, that will be so helpful for you in terms of getting your personal finances in order. And by the way, your business and personal numbers accounts, money should be completely separated, no intermingling. Number one, it creates headaches and stress. Number two, it creates problems and costs you potentially a lot of money because there's things you're going to miss.

Darren Wurz [00:13:05]:

And number three, it creates a very risky legal complication. One of the benefits of being an LLC is limited liability. You are a limited liability corporation. There is a separation. But if somebody sues you and, and they're looking through your finances and they're like, there's no corporate veil here. The money's just freely flowing back and forth. They're going to treat your personal assets as business assets. So for risk and for liability purposes alone, that should be enough to convince you to keep things separate.

Darren Wurz [00:13:43]:

Okay, but that's account number three. That's where your paycheck is going to come from. It is so, so, so important, as we will learn later on as we get into other books in our 2026 profit on purpose series, namely simple numbers. Owner's compensation is one of the first things you've got to get right because you will have never have any idea what if you're profitable at all. If you're not paying yourself a market wage, okay, you've got to pay yourself. All right? And we talked about that on several episodes before. We'll link them in the show notes for you. Account number four is your tax account.

Darren Wurz [00:14:25]:

I could go on and on about how important the tax account is. Okay. April should not feel like a panic attack, right? I know a lot of people who are in a lot of pain because of taxes. You know, you made a bunch of money, you got a huge settlement. You. And you spent it all. And then April came around and, oh, crap, I don't have enough money to pay taxes, and maybe I just won't file taxes this year. I've met a lot of law firm owners who are A, behind on paying taxes or B, behind on filing taxes.

Darren Wurz [00:15:02]:

Now, friend, if that's you, I don't want you to feel shame about that because you're not alone. There's a lot of folks who are in that boat, and profit first is going to be how you get out of that boat. You've got to start taking a percentage of everything that comes in and putting it in a separate tax account. If you do that, taxes won't be a surprise. Look at last year and figure out what is the effective tax rate on my business income. Okay. Ah, hey, it's 15%. Well, guess what? You should take 15% of everything that comes in and put it in your tax account.

Darren Wurz [00:15:48]:

And then you should be paying your estimated taxes on a quarterly basis. Now, I know some people think that they can do better in the stock market than the interest rate that they will owe the IRS if they don't pay their estimated tax payments. Maybe, maybe not. If you are an aggressive risk taker and you have the. You're not going to be upset by paying the penalty interest from not paying your estimated tax payments. Fine. But the problem is that money should not be sitting in the market because, you know, generally, usually each year the market goes up. Yeah, true.

Darren Wurz [00:16:26]:

So money I make in January, I should put it in the market because, you know, next year when I have to pay taxes, it'll have been in the market for 12 months. I might have made 10% on that money. But you're not guaranteed to make that 10%, friend. And it might be a year like 2022, the market may go down. Might be a year like 2008, the market may go down. And you don't want to be left holding the bag owing the IRS a whole bunch of money that you don't have. Okay? Your tax Account. All right.

Darren Wurz [00:16:59]:

A percentage should flow in there. And by the way, what percentage should flow into the previous account? The owner's comp account. We didn't talk about that. How much should you pay yourself? Well, there are some industry benchmarks. You can look at you as the owner. You should be making 25 to 30% of revenue that should be flowing to you personally. And let's talk about the tax account. By the way, what taxes does the tax account pay? The tax account is there to pay your taxes.

Darren Wurz [00:17:32]:

Yes. The tax account is there to pay your estimated tax payments and to pay your taxes as the business owner and to pay the LLC's taxes that flow through to you. Okay. And then the last account is the OPEX account. So this is the operating expenses account and it's last. Because we're going to run our business on what's last left over. We're going to prioritize everything else. You do not want the IRS to be your lender.

Darren Wurz [00:18:01]:

It's a bad idea. Okay. Money goes to the profit account. Money goes to the owner's comp account, Money goes to the tax account, and what's left over goes to the operating expenses account. That's how you determine the OPEX account percentage. After you figured out how to profit owner's comp tax, then you do OPEX profit first flips the equation. Sales minus profit equals expenses. Now there's two more accounts you're going to need.

Darren Wurz [00:18:34]:

These are your no temptation accounts. You're going to set up a profit hold account at a separate bank. So all the accounts we discussed before, those are at one bank. Find a completely different bank and put two accounts over there, a profit hold account and a tax hold account. And what you're going to do is periodically you're going to send everything in the profit account and everything in the tax account to this different bank. And these are going to be savings accounts that are interest bearing, hopefully high Yield, getting us 4% or more. You want to have these at a separate bank? Why? Why? You want these accounts away from you. You want to remove temptation.

Darren Wurz [00:19:23]:

You don't want to be looking at your tax account and be like, ooh, you know, it's a little dry this month, but I've got some money in my tax account. I think I'm going to use that. Don't do it. Same thing with the profit account. Transfers from one bank to another take time. That helps remove temptation. It's harder to get to if it's at a whole other bank. You want to make access Inconvenient you want to choose a bank that's not technologically forward.

Darren Wurz [00:19:55]:

And you also want to have instant and accurate knowledge and where your cash stands. You want to know how much is in each bucket. Okay, now how do you pick your banks? Well, for your primary bank, you want ease of access, ease of setting up accounts, ease of making payments, and any other business features that might be helpful. If you're not familiar, there's a bank that's kind of the official Profit First bank. It's relay bank, relayfi.com and we'll put the link in the show notes for you. I've been using Relay bank for two years now. Really, really enjoy it. It makes everything as a business owner super, super easy, especially collecting tax information from people.

Darren Wurz [00:20:42]:

You pay super easy for that. And you also have a lot of delegation authority. So you could put your office manager in charge of moving money around and give different levels of permission. You could give access to your CPA to your bookkeeper. It is super, super, super easy. So I'm not a spokesperson for Relay. I don't get paid. So from personal experience, I've really enjoyed using it.

Darren Wurz [00:21:09]:

Now you may be now for the other account for the secondary account. Like I said, you want to pick a bank that's not so tech forward, not so easy to use. Now, there's one thing we didn't talk about, and it's the Iolta account. Where the heck does the Iolta account fit into all of this? Well, friend, it sits outside the system. Here's why. Client funds do not equal firm revenue until billed or until recognized. So your Iolta account is going to feed into your income account when you bill against it, and only the then. Managing your Iolta account, as you probably are already aware, is supremely, supremely important.

Darren Wurz [00:21:56]:

Managing it correctly, it is the number one reason that attorneys face disciplinary action. All right, so here's your homework. I want you to set up your five accounts and at least do that. You can set up your, your profit hold and your tax hold account later. But at least let's get started this week. Set up your five foundational accounts as checking accounts at your bank or use a new bank or check out Relay. Find a bank that's super easy to use, that's not going to charge you extra money and extra fees for having more than one account. You know, I was applying for some financing and they asked for some bank statements and I sent them and like, oh my God, why do you have five accounts? I'm like, who has only one account? I mean, five accounts is what makes sense anyway.

Darren Wurz [00:22:52]:

Set up your five foundational accounts and your second homework item is start that 1% transfer on your profit account of everything that comes in. Even if you're extremely profitable already. Maybe you're not seeing it in the bank, you know, you're just seeing profit on paper. You're not seeing it in the bank. Start that 1% profit transfer and at the end of the quarter you'll have 1% of your profits set aside, and then you can slowly start shifting these percentages. Now, getting your percentages right is going to take some time. It's not an exact science. You're going to have to make some adjustments.

Darren Wurz [00:23:31]:

And the goal is to move the profit percentage higher, move the owner's comp higher. The tax is what the tax is right, and the opex is what's left over. Now, we've put together two really, really great resources for you, and they're going to be linked in the show notes. You can download them. The first is our Profit first setup guide for law firm owners. You can find that in the show notes and we have a cash flow assessment for you in the show notes as well. You can check that out when you have a second. All right? Now, if your cash flow system feels chaotic, we can help.

Darren Wurz [00:24:13]:

At the Lawyer Millionaire, we help law firm owners turn income into real wealth without burnout, without guessing, and without living in constant financial anxiety. And by the way, you don't just get me, you, you get a whole team. Although I am pretty great. You get a whole team of professionals to help you. Strategy, systems, accountability, and yes, an occasional kick in the arse, because we all need that from time to time. If you want to talk, book some time with me, the link is in the show notes. And if you want to go deeper, profit on purpose 2026 is happening right now inside the Lawyer Millionaire community. We've got monthly masterclasses going on that you won't want to miss.

Darren Wurz [00:25:01]:

Join us. You'll thank me later. Well, that's it today, friend. And remember, if your law firm isn't building you wealth, joy and freedom. What the hell are you doing? Can I get an amen, please? I'll see you next time.

Adedayo Adekunle

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