Today’s post is for those of you newer to business. I assume if you have been in business for 3+ years, you’ve learned a system for paying yourself. Those early years are critical at getting your business to the point where you CAN pay yourself and creating a strategy to do so. I don’t like hearing when new business owners say, “Well, as long as I break even, I’m OK.” NO, NO, NO. We do not start businesses to break even.
We need to earn a living from our business. However, this post isn’t about how to do that. (If you want to have a quick calculation on how much money you need to earn to pay yourself, revisit our sales plan worksheet here.) This post is about developing a strategy to pay yourself when you are meeting your sales targets in your business. Here are my…
3 Strategies for Paying Yourself:
1. Pay Yourself a Weekly Salary
This strategy forces you to pay yourself weekly. I prefer weekly over monthly because it’s a nice habit to develop. (When we pay ourselves monthly, we sometimes prioritize other business expenses over paying ourselves. Paying yourself weekly ensures that you’re paying yourself first.). Decide on a weekly amount you are comfortable with. In the beginning it may be as small as $100, but keep to this religiously. And, make sure you plan for it in your weekly cash flow. When you have steady sales, increase this amount as soon as possible. And, keep growing it. Once you are in this habit of cutting yourself a check each week, it becomes part of your earning mentality.
2. Pay Yourself a Percentage of Each Invoice
I like this strategy because it ties your personal income to what you actually achieve in your business. And, it is a little gentler on your business cash flow on the months where you may have slow sales. Find a percentage of each invoice that you will pay yourself. Let’s say that you decide upon 50% of each invoice will go to you. As soon as you collect any payment from a client, immediately cut yourself a check for 50% of that invoice. This ensures that you actually see the income from your business before it goes out the door on business expenses.
3. In Addition to these, Plan for Bonuses
I think meeting a sales target should be rewarded! Build this into your sales plan or your goal sheet. If you hit a projected dollar value, what will your reward be? Maybe it’s a cash payment – or maybe it’s a toy, like an iPad? It makes reaching that goal even more fun.
What are your strategies for paying yourself?