Hi, it’s your Money Mavens – can we talk about your pay?
Regardless of why you started your business, it’s still a business – how you’re making your living.
You need to pay yourself some form of income.
Most business owners don’t pay themselves enough to live on, let alone save for the future.
And we get it – running a business can be expensive!
For at least the first few months, if not years, it can seem like all of your hard-earned money is going back out the door to cover expenses.
You have overhead, taxes, marketing, IT, vendors to pay, and the list goes on.
When you start to see more cash coming in than going out, it’s tempting to store up cash in your business account.
“What if we have a down month or can’t cover all our expenses?”
Fight that fear!
Yes, your business is your baby, but you need to take care of yourself first.
Until you take money (assets) out of accounts titled to your business, pay the associated tax, and put the money into personal accounts under your name, the money isn’t yours.
In short, if your business goes under, the money disappears and you’re left with nothing.
If that sounds stressful, it can be!
But it doesn’t have to be that way.
That’s why we’ve spent the past month talking about how to pay yourself out of your business.
It’s the lynchpin to all the success and freedom you want to experience.
Our team meets business owners all the time who build up massive amounts of cash in their bank accounts for one real reason…
They’re afraid of moving the cash.
They’re willing to suffer the loss in purchasing power because of inflation.
They’re willing to not have enough to save for their future.
They’re willing to continue to pay themselves minimum wage – or less!
That shift needs to happen if you want to be truly successful in your business.
So, where do you start with paying yourself better as a business owner? We recommend taking the guesswork out of the picture.
Start by deciding what percentage of your business revenues will get allocated to each of your business needs, including your owner’s pay.
One of the best ways we know how to do this is through the Profit First system.
Our business owner clients set up multiple bank accounts:
- Income account
- Profit account
- Owner’s Pay account
- Tax account
- Retirement Savings account
- Operating Expenses account
(Take a guess what goes where…)
Twice a month you move income to the different accounts based on the percentage assigned for each account.
The million-dollar question then is, “How much do you pay yourself? How do you set that percentage?”
If you were to hire a replacement to run your company, what is a realistic salary for someone who does everything you do?
Factor in the hours, responsibilities, leadership needs, and be honest with yourself.
If you’re not paying yourself anywhere near that amount – don’t be discouraged!
You’re in a better position to know what needs to change because you know your number.
There may be a big gap between what you want to pay yourself and what you’re paying yourself right now. That’s okay.
Take this process slowly and move the percentages a few points at a time.
Start by determining that percentage of income and increase it over time.
This will take away the guesswork and fear of not knowing if there’s enough money.
To your prosperity,
Your HWM Money Mavens
P.S. – If you need more hands-on help with growing your business profits and personal wealth, go to moneyblueprintprogram.com to see our amazing profits coaching program for business owners just like you.