Hey!

Chris here. Welcome to Blueprint—the newsletter to help you build a winning engineering team.

Many founders have the same quiet panic: revenue looks good, but the bank account doesn't match.

They're making decisions based on gut feel and then reacting to the problems this creates weeks later. They’re left swinging between euphoric spending and emergency cost-cutting.

The problem is that they're using financial tools designed to explain the past, not control the present.

Let me show you what I've found to work after 2 decades running my own businesses. 👇️ 

📒 DEEP DIVE

Why Your Accounting System Creates Anxiety (And How to Fix It)

The hidden problem with traditional accounting and the system that fixes it.

The Problem with Lagging Indicators

Traditional accounting tells you what already happened. Maybe you weren't profitable in November. You don’t find out until December 15th, and by then the damage is done.

Now, these numbers aren't useless. Gross margin percentage matters because it tells you if your business model works at all. If your cost to deliver goods or services is outpacing revenue, you've got a fundamental problem.

But knowing your gross margin from last month doesn't change what you do today.

Lagging indicators measure outcomes. Leading indicators change behavior.

If a number doesn't influence your decisions right now, it's just historical data.

Why Founders (Unintentionally) Make Bad Financial Decisions

So what actually drives spending decisions for most founders? A quick glance at their bank account balance.

When the account is high, they feel euphoric. They buy equipment, upgrade systems, or start expanding

When it's low, they panic and slash costs reactively.

The problem is that 1 bank account gives you 0 visibility into what that money is actually for.

Is it available to spend? Is it already allocated to payroll? Do you owe taxes on it?

You have no idea until the bills come due.

Where Profit First Comes In

This framework comes from the book Profit First by Mike Michalowicz. I've recommended to more founders than I can count. If you haven’t read it, do yourself a favor and check it out.

As Mike lays out in the book, the traditional accounting formula is: Revenue - Expenses = Profit

Whatever's left over at the end of the month is your profit...maybe.

Profit First flips this formula: Revenue - Profit = Expenses

You decide upfront how much profit you need to make. That amount gets set aside first, and everything that remains is your budget for expenses.

Instead of hoping for profit at the end, you're designing it into the system from day 1. This way, profit becomes a constraint that forces better decisions, not a reward you might get if everything goes well.

How To Implement This with Your Business

Start by opening separate bank accounts for specific purposes:

• Revenue - where all money comes in

• Profit - where money goes first

• Owner's Compensation - what you need to survive

• Taxes - allocated immediately so you're never shocked

• Operating Expenses - what's left after everything else

Then, once revenue hits your account, you allocate it by percentage across these accounts.

Start with 1% to profit. If you're making $10,000 in revenue, put $100 in the profit account.

Then determine what you actually need to live. Say it's $5,000 a month. That goes to owner's compensation.

Allocate 15-25% to taxes depending on your situation.

Whatever remains goes to operating expenses.

And here's where it gets a little uncomfortable: That's your budget. That's the money you have to work with.

This might sound crazy at first. That’s normal—and actually part of why this approach works so well.

The Constraint Is the Point

When you see that operating expense number, your first reaction might be panic. It might feel like there's not enough to cover everything.

But that reaction is essential. You're being forced to confront reality instead of postponing it.

Founders overspend on operating expenses because there's no forcing function. They see money in the account and assume they can spend it.

Profit First eliminates that assumption.

The constraint makes you ask harder questions: What actually needs to happen this month? What can wait? What are we spending money on that doesn't matter?

When you have a particularly good revenue month, the percentages automatically spread the increase across all accounts. You don't get to blow the extra money on impulse purchases because the system has already allocated it.

How This Works for in the Real World

I've used this system, so I can vouch for the fact that it creates stability where there was chaos.

You can look at your bank accounts and immediately know your financial position. You don't have to wait for a call back from your accountant or do somersaults in Excel.

The profit account grows every month, even if it's small at first. After a few months at 1%, you increase to 2%. Then 3%. You slowly expand the profit allocation, which forces the business to become more efficient over time.

The tax account prevents the shock of owing $67,000 you didn't plan for.

And the owner's compensation account means you actually pay yourself instead of taking whatever's left.

This way, you stop making emotional financial decisions because the system creates boundaries that protect you from yourself.

BEFORE YOU GO…

I challenge you to open the accounts this week.

Yes, the constraint will feel uncomfortable at first, but that's how you know it's working.

Traditional accounting will still matter for compliance and understanding your business model. But Profit First will let you operate with clarity instead of anxiety.

Trust me, you don't need more revenue to feel in control. What you need is a system that aligns with how you actually make decisions.

Build the structure now, and let it force better choices every single day.

Talk soon,

Chris.