Real Revenue in Profit First: What You Need to Know
Most business owners look at income and think, “This is what I made.” However, to truly understand your finances, you need to calculate your real revenue —the money that’s actually available to run your business. This blog breaks it down.
Understanding this can save you from serious financial surprises.
Why Real Revenue ≠ Gross Revenue
Here’s where most entrepreneurs slip up:
Let’s say you bring in $20,000 this month but spend $8,000 on subcontractors and print costs.
Your real revenue is $12,000 — not $20,000.
That difference matters. Your Profit First allocations should only apply to what you truly keep, not what passes through your hands.
How to Calculate Real Revenue (Step-by-Step)
Before applying the Profit First method, it’s essential to calculate your real revenue so you’re not allocating funds based on inflated numbers.
1. Add Up Total Monthly Income
Look at your Income account: how much hit the bank this month?
Example: $20,000 total income
2. Subtract Pass-Through Expenses
These are costs directly tied to delivering your product or service.
Examples:
- Subcontractor payments (second shooters, editors)
- Client materials (albums, prints)
- Fulfillment fees
Example: $8,000 in pass-throughs
$20,000 – $8,000 = $12,000 real revenue
3. Apply Your Profit First Percentages
Now base your allocations on $12,000, not $20,000:
- 50% Owner’s Pay → $6,000
- 30% OPEX → $3,600
- 15% Tax → $1,800
- 5% Profit → $600
Real Revenue Cheat Sheet: What Counts?
Not sure what counts as pass-through when calculating Real Revenue? Here’s a simple guide:
- Monthly software tools – ❌ Not pass-through. These are standard operating expenses you’d pay whether or not you had clients.
- Print costs for clients – ✅ Pass-through. This is directly tied to delivering a sale.
- Contractor for client work – ✅ Pass-through, if they aren’t a core employee. This counts as fulfillment.
- Bookkeeper or accountant – ❌ Not pass-through. This is business admin, not directly tied to client work.
Ask yourself: Would I still pay this if I had no clients this month?
If yes → it’s OPEX. If no → it’s pass-through.
Common Mistakes When You Calculate Real Revenue
One of the biggest mistakes entrepreneurs make is assuming total income equals usable money. When you calculate real revenue properly, you uncover what’s actually available for Profit, Owner’s Pay, and Taxes, and that changes everything.
Venus’ Bottom Line
Your real revenue is where strategy starts.
It’s what you control. It’s what you can allocate. And it’s the key to making Profit First actually work without panic or confusion.
Want Help Applying This?
I’m Venus Michael, a Profit First Certified Bookkeeper at One21Accountability. We help creative entrepreneurs, consultants, and service providers understand their real numbers — so they can stop guessing and start paying themselves with confidence.
