When to Start Paying Yourself as a Business Owner
When you are starting a business, the last thing you should be thinking about is paying yourself. What you should be thinking about is your budget and/or funding you may need to get your business off the ground.
Let’s fast forward a little bit. You are 2-3 years in. You are selling products, services or both and there is money coming in. (If there is no money coming in you need to make a change – that’s for another article.) Generally, if you are selling products when a product sells you make a profit. It really is that simple and at some point you should pay yourself for all of the hard work you have done.
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With business, like your personal life you have several expenses – some variable and some not that you pay monthly. This is where a lot of businesses put their dollars every month:
1. Credit Card Payments. If you have no credit cards to pay down after you’ve started a business good for you! You are the few!
2. Inventory. As a retail company of any sort, you need to have inventory to sell and this requires an investment.
3. Bills. Whether you work from home or from an office you have monthly expenses. You pay rent, electric, cell phone, office supplies and more.
4. Marketing. How are you getting the word out about your business? Even if you are not “Advertising” in the sense that you are placing ads in a newspaper, you are most likely either paying someone to run your Social Media accounts, or at the least using Social Media ads to boost your company’s visibility.
5. You! When you can easily take care of 1-4 on this list without feeling like you are pinching pennies – pay yourself! Take a % of your company profits every month after your bills are taken care of and put it in your bank account!
When you are ready to start paying yourself keep the % the same on a monthly basis. This will keep you organized and on track. If your business has a slow month – your pay will be lower but you are still getting the same percentage, which should keep you afloat. Try not to make this a dollar amount or a salary unless your business is really booming. It is much more important to keep some cash flow for your business needs so that you can grow.