How to run a Profit First instant assessment on a consulting firm.

Most consulting firm owners know their revenue to the dollar and their profit to the nearest shrug. The Profit First instant assessment fixes that in about ten minutes. We built a free Instant Profit Assessment for consulting and IT services firms. This note walks through how it works and what it usually shows.

Step one: find your real revenue.

Take total revenue for the last 12 months and subtract subcontractors and anything you pass straight through to clients. What is left is real revenue: the money your firm actually earned. Every percentage in the assessment is calculated on this number.

For consultancies that lean on contractors, this is the step that changes the picture most. A firm that invoices $4M and resells $1.5M of contractor time is really a $2.5M firm, and it should be judged against $2.5M targets.

Step two: split it four ways.

Real revenue goes into four buckets: profit, owner pay, tax and operating expenses. Owner pay is only what working owners take as salary and drawings. Everyone else on the payroll, including senior consultants and salaried partners who are not owners, sits in operating expenses. Profit is whatever is left after the other three.

Divide each bucket by real revenue and you have your current allocation percentages. That is how the firm actually splits its money today, as opposed to how you think it does.

Step three: compare with the targets.

The Profit First method publishes target allocation percentages for each real-revenue band. For a firm with $1M to $5M of real revenue, the starting targets are 10% profit, 10% owner pay, 15% tax and 65% operating expenses. The gap between your current percentages and the targets, expressed in dollars, is the assessment.

What consultancies almost always find.

• Profit close to zero. Not because the firm is bad at the work, but because profit is whatever survives the year.
• Operating expenses well above target. Bench time, unbilled senior hours, fixed-fee overruns and software nobody uses all land in this bucket.
• Owner pay squeezed or irregular. Founders take less, or take it late, to keep the firm running. That makes the business look healthier than it is, and it is the first thing to fix.

What to do with the gap.

Do not close it in one go. Move your current percentages a few points toward target each quarter. Open separate accounts for each bucket, allocate twice a month, and let the profit account build. Operating expenses shrink to fit what is left, which forces the conversations about bench, pricing and utilisation that are easy to put off.

That rhythm is what the ConsultancyOS Profit First module runs inside the firm's books: twice-monthly allocation runs, current versus target percentages tracked automatically, and quarterly distributions recorded on real numbers.

Run yours.

The Instant Profit Assessment takes under a minute and runs entirely in your browser. Nothing is sent or stored. If the result surprises you, the Consulting Firm Readiness Score shows where else the firm is leaking margin.

Profit First is a method created by Mike Michalowicz. The assessment is an independent tool from ConsultancyOS and is not affiliated with Profit First.