What Your Business Can Learn From Toothpaste and Toilet Paper
Your Business Will Spend Whatever You Make
Key Takeaways
Parkinson's Law explains why business expenses tend to expand to match whatever revenue you bring in.
Higher revenue does not automatically mean higher owner pay. Structure does.
The Profit First system uses separate bank accounts for profit, owner pay, taxes, and operating expenses so every dollar has a job the moment it arrives.
Constraint is what creates financial clarity, not more discipline.
If revenue doubled tomorrow and you are not sure where the money would go, that is a structure problem, not a revenue problem.
Mike Michalowicz, the founder behind Profit First, talks about toothpaste.
When the tube is full you glob it on. You're not even thinking about it. But when it's almost empty you somehow find a way to get every last bit out.
You squeeze it from the bottom. You roll it up. You get four more days out of something you thought was done.
Same person. Same toothpaste. Different constraint.
And if the toothpaste didn't convince you, think about toilet paper. Full roll, you pull freely. Down to the last few sheets and suddenly you become a rationing expert. Nobody taught you that. The constraint did.
That's Parkinson's Law. Originally it described time. Tasks stretch to fill whatever time you give them. But your business finances work exactly the same way.
I've watched it happen with almost every client we've worked with. Revenue goes up and things feel good. Then slowly, without anyone making a single irresponsible decision, expenses go up too. A new tool. Another subscription. A contractor who made sense at the time. A slightly upgraded version of something you already had. None of it felt like a big deal because none of it was. Each thing had a reason. And there was room.
Until there wasn't.
That's usually when people find us. Not because of a crisis, but because they look up one day and realize they just had their best revenue year ever and still can't pay themselves what they deserve. The money came in. It just didn't stay.
This is not a discipline problem. I've seen it with agency owners doing $800K who take home $40K. E-commerce founders at $1.5M who still feel cash-strapped every month. Smart people with real businesses who are doing everything right except for one thing: nobody told the money where to go.
When it all lands in one account, the business finds a way to use it. Always. The full tube gets squeezed freely.
The fix is the same thing that gets you those four extra days of toothpaste. Constraint. Multiple smaller accounts, each one with a specific job. Profit. Owner pay. Taxes. Operating expenses. Money gets allocated to each one the moment it comes in, before anyone has a chance to spend it on something else. Whatever is left in the operating account is what the business runs on. Not what came in. What's left after everything else is taken care of first.
When that structure is in place the game changes completely. You stop wondering where the money went. You stop robbing one thing to pay for another. You stop feeling broke on a good revenue year.
If your revenue doubled tomorrow, where would the money go? If the honest answer is you're not sure, that's the thing to work on. Not someday. Now.
Frequently Asked Questions
What is Parkinson's Law and how does it apply to business finances?
Parkinson's Law originally described how tasks stretch to fill whatever time you give them. The same thing happens with money in business. When revenue lands in one account, expenses tend to expand until they use whatever is available. It is not a discipline problem. It is a structural one.
Why does my business feel cash-strapped even when revenue is growing?
This is one of the most common patterns we see. As revenue grows, expenses grow with it. A new subscription here, a contractor there, an upgraded version of a tool you already had. Each decision made sense at the time. But without a system that separates and protects profit and owner pay first, the operating side of the business absorbs whatever is available.
What is the Profit First system?
Profit First is a cash management method created by Mike Michalowicz. Instead of running your business out of one main account, you set up multiple smaller accounts, each with a specific purpose (profit, owner pay, taxes, and operating expenses). Revenue gets allocated across those accounts based on set percentages the moment it comes in. What is left in the operating account is what the business runs on.
Do I need to earn more revenue to pay myself more?
Usually no. Most owners we work with do not have a revenue problem. They have a structure problem. When you build a system that pays profit and owner pay first, before operating expenses have a chance to absorb everything, owner pay improves even without a revenue increase.
How do I know if I have a structure problem or a revenue problem?
If your revenue is growing but your take-home pay is flat or shrinking, that is a structure problem. If you cannot easily answer where your money would go if revenue doubled tomorrow, that is also a structure problem. A Financial Clarity Call is a good place to figure out which one is really going on.
Who is Profit First best suited for?
Agency owners, e-commerce founders, and coaches are the businesses we work with most often at JEA. If you are running a business and the money coming in feels like it disappears too fast, this system was built for you.
How is Profit First different from what my bookkeeper or CPA already does?
Your bookkeeper keeps your books accurate. Your CPA files your taxes. Neither of those roles is designed to set up a cash management system that changes how money moves through your business day to day. Profit First is the operating layer between what the money is doing and what you want it to do. That is where we come in.
Book a Financial Clarity Call
Book a Financial Clarity Call and we'll look at your numbers together. We'll tell you exactly what we see.
