The Standard Accounting Formula (GAAP) is ingrained in every MBA’s brain: Sales - Expenses = Profit

It is logical. It is mathematical. And for 90% of entrepreneurs, it is fatal. Standard accounting treats Profit as a “leftover”. It tells you: “Pay your suppliers, pay your landlord, pay your staff, pay Meta/Google… and IF there is anything left, that is your profit.” Human nature dictates that expenses always expand to fill the available cash (Parkinson’s Law). If you have $100,000 in the bank, you will find a “Critical Strategic Initiative” that costs $100,000. The result? You run a $10M business that lives paycheck to paycheck. This is not a business; it is a cash-eating monster.

At Maison Code Paris, we advise founders to flip the equation. We adopt the Profit First methodology (popularized by Mike Michalowicz). Sales - Profit = Expenses We take the profit off the table before we pay a single bill.

Why Maison Code Discusses This

We are typically hired to build “Tech”. But we often see clients pause projects because “Cash is tight this month”. Cash flow variability is the enemy of Engineering Velocity. You cannot commit to a 6-month replatforming project if you don’t know if you can pay the server costs in November. We discuss Financial Engineering because it is the prerequisite for Software Engineering. A broke company cannot innovate.

1. Parkinson’s Law of Money

Parkinson’s Law states: “Work expands to fill the time available for its completion.” If I give you 2 weeks to write a report, it takes 2 weeks. If I give you 2 hours, it takes 2 hours.

The financial corollary is: “Expenses expand to fill the cash available.” If you look at your bank account and see $50,000, your brain says: “I can afford that new Shopify Plus app. I can afford that agency retainer.” You spend it because it’s there. The supply creates the demand.

Profit First uses “Artificial Scarcity”. By moving the profit out of the operating account immediately, you force yourself to run the business on less. If you only have $45,000 left for expenses, you become scrappy. You negotiate. You kill zombie subscriptions. Innovation comes from constraint, not abundance. When you remove the “Fat”, the “Muscle” of the business has to work harder.

2. The 5-Account System

You cannot execute Profit First with a single bank account. It requires visual separation. You need to open 5 Checking Accounts at your bank.

1. Income (IN)

Purpose: The “Inbox”. All revenue flows here. Shopify Payouts, PayPal, Stripe, Wholesale wires. Rule: You never pay bills from this account. 0% goes out to vendors. It is strictly a holding tank.

2. Profit (PRO)

Purpose: The Reward. This is for the shareholders (You). It is also your war chest. Money here is used for quarterly dividends or emergency reserves. It is NOT for OpEx. Seeing this balance grow gives you the psychological safety to make bold decisions.

3. Owner’s Comp (OC)

Purpose: The Salary. Most founders are martyrs. They don’t pay themselves. “I’ll pay myself when we hit $1M.” This leads to burnout and resentment. You must pay yourself a market salary for the job you do (CEO). Only then is the business actually viable.

4. Tax (TAX)

Purpose: The Government’s Money. Nothing kills a business faster than a surprise $50k tax bill in April. You save for taxes essentially in real-time. Paradoxically, you will start “looking forward” to paying taxes because the money is already there sitting in the account.

5. Operating Expenses (OpEx)

Purpose: The Engine. This is what you have left to run the company. Rent, Inventory, Ads, SaaS, Payroll. This is the only account your accounts payable team has access to.

3. The Ritual: The 10th and 25th

You do not manage cash flow daily. That is micro-management. You manage it twice a month: on the 10th and the 25th. Why these dates? Because they roughly align with payroll cycles and vendor terms, but utilizing a bi-monthly rhythm forces you to batch your admin work.

The Process:

Check the balance of the Income account (e.g., $20,000 accumulated over the last 2 weeks).
Transfer TAPS (Target Allocation Percentages) to the other accounts.

Example Allocation (Healthy E-com Brand):

Profit: 10% -> $2,000 to PRO.
Tax: 15% -> $3,000 to TAX.
Owner’s Pay: 20% -> $4,000 to OC.
OpEx: 55% -> $11,000 to OPEX.

The Income account is now $0.
You pay all your bills from the OpEx account.
- “Wait, my bills are $15,000, but I only have $11,000 in OpEx!”
- Good. The system is working.
- The system is screaming at you: “Your business cannot afford its lifestyle.”
- You must cut $4,000 of costs today. Not next year. Today.

4. The “Vault” Strategy (Removing Temptation)

For the Profit and Tax accounts, we recommend using a different bank entirely. Make it annoying to access. No debit card. No online transfer linkage. Why? Because when cash gets tight (and it will), you will be tempted to “borrow” from the Tax fund. “I’ll just pay the supplier now and put it back next week.” You won’t. By putting the money in a different bank (“The Vault”), you add friction. The 3-day transfer delay gives your prefrontal cortex time to override your panic. It forces you to solve the actual problem (too much spending) rather than the symptom (not enough cash).

5. Why Investors Hate This (At First)

Venture Capital operates on a different physics: “Burn Rate”. They want you to reinvest 100% (or 120%) of revenue into Growth (Ads). Taking profit out is seen as “lack of ambition”.

We disagree. Unless you are aiming for a Unicorn IPO (0.01% chance), you should prioritize Solvency. A profitable business controls its own destiny. It does not need to beg for the next round. A burn-rate business is addicted to the next funding round. If the market turns (like in 2023), funding dries up, and the business dies. Profit is Oxygen. You cannot hold your breath for 5 years waiting for an exit.

6. Dealing with Debt (The Snowball)

If you have existing debt, Profit First handles it. We follow the Dave Ramsey Snowball Method.

List all debts smallest to largest.
Pay minimums on everything.
Allocate 99% of your “Profit” distribution (quarterly) to the smallest debt.
Kill it. Move to the next.

The psychological win of closing a small loan gives you momentum to tackle the big ones.

7. The “Small Plate” Psychology

Diet nutritionists tell you: “If you want to eat less, use a smaller plate.” If you put a small amount of food on a giant platter, your brain screams “Starvation!” If you fill a small plate, your brain says “Feast!”

The OpEx Account is your small plate. When you log in and see $11,000 available for bills, you deal with it. You force your marketing team to get better ROAS. You force your logistics manager to lower shipping rates. You stop upgrading MacBooks every year. You become a Lean Operator.

8. Conclusion

You don’t need to be profitable on Day 1. But you need the habit on Day 1. Start small. Set your Profit Allocation to 1%. If you sell $1,000, take $10 and put it in a jar. Prove to yourself that the business can run on 99% of revenue. Then next quarter, bump it to 2%. Then 5%. Build the muscle.

When the next recession hits, your competitors (running on 0% margins) will collapse. You will have a war chest of cash. You will buy their inventory for pennies on the dollar. That is the ultimate strategic advantage.

Bleeding cash?

Do you have high revenue but an empty bank account? We implement Profit First architectures and automated cash flow dashboards.

Hire our Architects.