Making Profit First work for Insurance Agents

Donna Lim
May 1
2 min read

You took the risk of starting your own insurance agency, envisioning a business that would support the lifestyle you wanted. But now, instead of financial security, you are feeling exhausted, frustrated and out of cash.

Then, you heard about Profit First – a cash flow management system that promises financial clarity and profitability. The idea seems simple, yet when you tried to implement it, it just did not work for you. Why?

If this sounds familiar, let me assure you: Profit First DOES work for insurance. But, the unique structure of the insurance business requires a different approach. Here is the key on correcting the most common mistakes.

Incorrect Allocation Percentages

The allocations in the Profit First book are based on an average business model, where the owner operates solo until reaching $250,000 to $500,000 in revenue. But insurance agencies aren’t structured this way – most have at least one or two team members from the start.

Fix: Maintain a larger operating expense by adjusting your revenue allocations. Your team’s payroll, commissions, and operation needs must be considered from day 1

Misunderstanding Owner’s Compensation

Profit First defines Owner’s Pay as anything that benefits the owner – not just a salary. This includes:
Draws, wages and distributions
Business-paid expenses (cell phone, health insurance, car payments, gas, insurance and maintenance.)
Travel (if using the 51% business rule for deductions)
Fix: Accurately categorizing owner-related expenses to ensure the correct allocation between owner’s compensation and operating expenses. This will prevent overestimating profitability while making sure you get paid what you deserve.

Not Understand Fixed Vs. Variable Expenses

A key part of Profit First is knowing your expenses and adjusting them as needed.

Fixed Expenses – Constant	Variable Expenses – Fluctuate
Rent	Team bonus/commissions
Wages	Marketing
Employee Benefits	Meals
Retirement Match	Postage
Phone System	Fuel
Dues & Subscriptions
Insurances
Professional Fees
Utilities
Loan/Credit Card payments

Fixed expenses don’t decrease when revenue drops, but that doesn’t mean they can’t be reduced.

Fix: Regularly review and cut unnecessary expenses. If revenue is lower than expected, reduce spending on the “nice-to-haves.” The key is balancing smart cost-cutting while maintaining operational efficiency.

Pro Tip: Know the ROI on every team member. Tough decisions are sometimes necessary, but running a business should support your lifestyle- not drive you into financial stress.

Giving up Too Soon

Cash management takes time to master. Many agents expect instant results, but Profit First is a process, not a quick fix.

Fix: Stick to the system. Cash flow improves through a series of actions:
- Increasing revenue
- Reducing unnecessary expenses
- Optimizing cash allocation

Doing both will help you reach financial freedom faster.

Trying to Do it Alone

80% of businesses that implement Profit First experienced increased profitability within the first year.
Businesses using Profit First eliminate debt 2-3x faster than those that don’t.
Over 500,000 businesses have successfully implemented this system.

You don’t have to struggle with cash flow alone.

Take control of your Profits – Start today.

It’s time to stop stressing over cash flow and start using a system that works.

Schedule a free discovery call now! Let’s build a customized Profit First plan to help your agency thrive.