Are You Paying Yourself Enough?
Paying yourself should be the easy part of running your own business. Yet while many struggle to work out exactly how much they should pay themselves, there are also plenty of others who are unable to rewards themselves with what they deserve.
Working Out Your Salary
First things first is working out how much you should give yourself. When you’re starting out often you can’t give yourself a top CEO salary but you do need to be covering your basics. So work out all of your outgoings – and maybe scale a few down – and check that they leave room for your pay. Don’t be modest and don’t be over-the-top.
Breaking even or even seeing a profit increase for a few months doesn’t mean you can start upping your salary significantly. You need to make sure your company is truly profitable and not benefiting from a short term boost in customers. If you do want to give yourself a bit more though, why not consider rewarding yourself with a bonus made up of a percentage of your profits that month?
After a long run of successful months, you can feel safe to start upping your pay to truly reflect the time and effort you’ve sunk into your business. But what if things have been going well, but you’re still struggling to make the cash you deserve? Your sales have been up every month yet breaking even never seems to get easier. What’s happening?
Review Your Cash Flow
One of the most common problems when it comes to rising sales with no rising income is late payments. It doesn’t matter how much product you’re shifting, if you’re not getting paid for it, it’s not helping. Businesses are more global nowadays and this isn’t just a problem in the US, UK companies are relying on small claims courts to get what they’re owed, while in Australia the government has had to step in with a Prompt Payment Protocol to tackle the issue.
In other words, whether your customers are domestic or international, actually getting paid for your services is an important step in paying yourself. This is why including a late payment clause in your contract is highly important. Include interest and penalties for when your client doesn’t pay up as this will not only encourage them to pay on time, but it’ll make sure you’re not out of pocket when they finally do.
You’ll most likely have some protection in your state, so be sure to research what legal means you can use to get what you’re owed.
Balance Your Books
If you’re not having cash flow problems, yet you’re still struggling to see your fortunes improve, it looks like you’re going to have to balance your books. Money is leaking out somewhere and you’re going to need to fix it. Take a long, detailed look on where all your money is going and try to trim the fat.
It doesn’t have to be one big cut either. By changing electricity provider, looking into free software alternatives, or renegotiating your office rent you can make small savings that can add up to bigger ones. It might even be worth looking into alternative sources of revenue. Got a spare desk no one’s using? Then rent it out to local freelancers for a bit of extra cash.
Finally, if you’re still struggling to make your way despite getting paid on time and cutting any waste, it’s time to re-think your business model. Is it actually sustainable? Are you charging enough? Is your company structure just not viable? It might be that you’re spreading the work too thin and need to cut back on staff or that you’re simply selling yourself too short.
In the end, you deserve to get paid a decent wage for the time, energy and ideas you pour into your business. Spend some of that time making sure that you do.