As a Small Business Owner, Are You Getting Paid 3 Ways?
The Business Owner’s Paycheck
As business owners, we can be so busy making sure the bills get paid and the product gets out the door. Often, we don't prioritize our own compensation. Many new business owners take their pay from what’s left after paying employees and vendors.
It doesn't have to be that way. There's a different strategy that allows business owners to get paid 3 ways from your business: For what they do; For the risk they take; and For the going concern they’ve built.
Curious how that works?
One: Getting paid for our services
Just like the employees and contractors we work with, we should get paid for the actual work we perform in our business. Most of us wear many hats in our business, and we should get paid for all those hats!
As your business grows, the tasks you initially performed often get delegated to employees. Employees should never go without a paycheck, and you shouldn’t either!
The amount you pay yourself should be similar to the market rate you would have to pay someone if you hired someone else to do the those jobs. As your company grows, you will be going up the management ladder and your salary should increase accordingly.
If there's a cash flow concern and and it seems impossible to pay yourself for the work you're doing, you might have one of two problems: The goods and services you sell may not be priced correctly, or the number of clients you have may need to increase so that you reach an acceptable volume in your business to cover the administrative cost of operating.
Two: Getting paid for your risk
After you’ve paid yourself for the jobs you are doing in your own company, there should be something left over: profit. As a business owner, you have earned that profit; it’s your reward for taking the risks that go with business ownership.
If there’s no profit left over, then there could be a number of problems. This is where accounting professionals can help you review the revenues and expenses in your business and see where things are not adding up.
So far, your paycheck and your profits get you paid twice as a business owners, and that’s the way it should be. But there’s also a third way.
Three: Getting paid for your going concern
A third way to get paid is building up the value in your business to cash out by selling it. There are many things you can do throughout the years to boost your business valuation, and the more you can do that, the higher the proceeds will be from your business.
One of the factors that can increase all three forms of compensation is your financial skillset. Building your financial skills by working with accounting professionals can help you price your goods and services accurately, improve your cash flow, hire employees at the right pay rates, and implement many more financial success factors in your business.
When you’re ready to review your small business owner paychecks, let's chat! We can chat a bit more about where you're at with your business and put my financial expertise to work helping you get more from your business.