Profit First for UK Ecommerce Sellers: Getting Started

If you’re a UK-based ecommerce seller looking to maintain healthy margins and keep more cash in your pocket, the Profit First method might be just what you’re looking for.

In this guide, we’ll explore how you can use the Profit First methodology to transform your business from a cash-guzzling machine into a well-oiled, profit-producing engine. We’ll draw on expertise from Duncan Lloyd, CEO of Ecom Profit Genie and Co-Founder of Profit First Professionals UK.

You can also get an overview of Profit First from Duncan in our video below.

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What is Profit First?

Profit First is a cash management system popularised by Mike Michalowicz in his book of the same name. At a high-level, Profit First is exactly what it sounds like – it simply means prioritising profit at your business.

It does so by flipping the traditional accounting formula as follows:

Why does this shift matter?

According to Duncan:

“The traditional accounting formula leaves profit as an afterthought. Profit is what’s leftover. And who wants to live on leftovers? Instead, we want to prioritise profit, because what gets prioritised, gets done!”

With Profit First, you make the choice to carve out your profit before anything else. Then, you run your business on what remains.

This small mindset shift can have a big impact on your bottom line.

Why Profit First Works for UK Ecommerce Businesses

Are you measuring the success of your ecommerce business by:

1. Your top-line revenue?
2. Your bank account balance?

If so, you’re not alone. While focusing on sales revenue isn’t necessarily wrong, it can sometimes be misleading. As Duncan explains:

“During our recent analysis of over 125 ecommerce clients, we found that while revenue was up by 13%, profit margins were shrinking due to rising costs from Amazon fees, inventory, shipping, and overheads. Profits are the scoreboard of business, and I want you to win at this game by focusing on the score.”

The good news? Profit First helps you concentrate on profitability by leveraging your natural tendency to manage your business through your bank account – an approach that’s particularly beneficial for UK ecommerce sellers.

UK ecommerce sellers face a unique set of challenges:

• Complex tax environment (VAT, sales tax, etc.)
• Confusing (and sometimes growing) fees from platforms like Amazon and Shopify
• Fluctuating inventory and shipping costs
• And more…

Amid these complexities, it’s easy to finish a busy sales period and wonder where all the money went. Profit First prevents this problem by giving you a clear structure for allocating funds into dedicated accounts – such as Profit, Operating Expenses (OPEX), Taxes, and Income.

This ensures you:

• Always know how much money is allocated for each aspect of the business
• Consistently build a financial cushion
• Develop the discipline to operate within real cash constraints (rather than relying on “potential” cash)

By adopting Profit First, you’ll hardwire profitability into your operations and set yourself on the path to long-term success in the ever-evolving world of UK ecommerce.

The Core Principles of Profit First

At its core, Profit First is about setting up and managing multiple bank accounts with intention. By regularly checking these accounts, you can get a clear snapshot of how much cash is available for specific areas of your business.

You might have heard that relying on your bank balance alone won’t give you the full picture of your financial health.

But Duncan sees it differently:

“Most accountants will tell you that bank balance accounting doesn’t work. I’m here to tell you that not only does it work — it can completely transform your finances, if you do it the right way.”

Here’s what that looks like.

1. Open multiple bank accounts
   At a minimum, set up the following accounts:
   • Income: All sales revenue goes here first.
   • Profit: A portion of the funds from Income goes here.
   • Taxes: For VAT and other tax obligations.
   • Operating Expenses (OPEX): The money left after Profit and tax/VAT allocations that you can actually spend.
     
2. Allocate funds on a regular schedule
   Typically, you’ll allocate funds twice a month to build consistency. If you don’t have the discipline or time, set up automatic transfers.
   
3. Prioritise profit above all else
   By “forcing” profit into your business first, you ensure you’re always working within real spending limits. Over time, this helps identify where you’re overspending.
   
4. Use your balances to guide decision-making
   If you’re checking your bank balance to make decisions anyway, make it accurate by separating out Profit, Tax, and other critical allocations so you know exactly what’s left for daily operations.

Don’t Forget VAT

In the UK, you have an extra layer of complexity: VAT. One key tweak is dedicating a VAT account so you’re never caught short at tax time. Set aside the VAT portion of each sale as soon as you receive payment. That way, the money is ready when you need it.

• Actionable tip: Have a separate bank account labeled “VAT” and transfer the correct percentage of each sale (e.g., 20%) into it immediately. Treat this account as untouchable.
  

How to Get Started with Profit First – Right Now

Duncan’s #1 piece of advice – start small, but start now:

“Your business can manage on 99% of its cash, right? Of course it can. So, you can afford to put 1% away from today.”

Here’s how.

1. Open a ‘Profit’ account
   • Even if you deposit just 1% of your income into it, do it today.
     
2. Commit to 3 months and build the habit
   • For the next three months, every time you receive income, transfer 1% into the Profit account.
   • If 1% seems too low, push it to 2% or 3% – but the point is to start.
     
3. Expand your accounts
   • Set up your Tax/VAT and OPEX accounts and transfer funds to your Profit, VAT, and Tax accounts consistently (set up auto-transfers or mark your calendar).
   • Keep a close eye on OPEX spending. If it’s too high, you’ll need to adjust expenses or raise margins.
     
4. Reward yourself
   • Every quarter, take half of what’s in your Profit account as a bonus or distribution. A tangible reminder that you’re in business to make a profit, not just sales.
     
5. Scale Up Over Time
   • Once 1% feels comfortable, bump it to 2%, 3%, or even more.
   • Consider adding accounts for Inventory or other big expenditures so you can reserve funds in advance.

The Power of Accountability

Duncan likens Profit First to a fitness regimen: the method is simple, but staying disciplined and consistent is hard.

Having a coach or accountability partner – like the team at Ecom Profit Genie – can dramatically improve your chances of success. They’ll help you stay consistent with allocations, spot hidden cost drains, and keep your focus on profit.

“Having an accountability partner to keep you on track can be incredibly powerful. No shortcuts here – just sound principles and good, honest hard work creating profitable habits.”

Common Misconceptions About Profit First

1. ❌ It’s a magic wand that can fix everything
   Profit First isn’t a fix-all. You still need a profitable business model and products that customers want.
   
2. ❌ Bank balance accounting is inaccurate
   Traditional accounting wisdom claims this leads to mistakes. But with Profit First, you’re carving out profit, tax, and other allocations in separate accounts – giving you clarity on your true operating budget.
   
3. ❌ It’s too complex
   If you can handle the complexity of inventory management, shipping, returns, and platform fees, you can handle a few extra bank accounts.

Next Steps: Get Support and Take Action

If you’re intrigued and ready to set up your own Profit First system, don’t hesitate.

Here are some resources to help you get started:

• Request a free copy of ‘Profit First for Ecommerce Sellers’
  Just connect with Duncan on LinkedIn and say, “Yes please, I’d love a free copy of Profit First for Ecom Businesses.”
• Explore the Destiny Programme
  Head to the Profit Genie Group’s Destiny Programme page to learn how they help ecommerce businesses implement Profit First successfully.
• Watch & Learn
  Watch Duncan’s quick Profit First overview with A2X to see how it all fits together.

Have questions or want personalised help?
Reach out to Duncan Lloyd and the Ecom Profit Genie team for hands-on support with implementing Profit First in your ecommerce business.

With Profit First, you’ll build a stronger, more resilient business – one that looks great both on paper and in your bank account. Don’t wait for year-end to find out if you’re profitable. Make it happen from day one, and watch your ecommerce venture thrive.