How to Ensure Your Business Pays You First
How to Ensure Your Business Pays You First
Starting and running a business is a challenging and rewarding journey, but it can often feel like you're working tirelessly and still struggling to pay yourself. If you're like many business owners, you might be putting in 60-hour weeks and still find that there's never enough left for you after expenses, employees, and vendors have been paid. It's time to flip the script and ensure your business is rewarding your efforts. Here’s how you can do just that.
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**Welcome to Grit and Growth Business!**
I'm Ralph, and today we’re talking about something crucial for every business owner: paying yourself. As someone with over 30 years of experience working with accounting and consulting clients, I've seen firsthand the importance of a steady cash flow system. The journey of profitability begins when you start recognizing your worth and carving out a consistent paycheck for yourself.
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**Understanding the Common Barriers**
Many small business owners cite insufficient cash flow, prioritizing vendor payments, high debt, unpredictable revenue, and the need to reinvest profits as key obstacles to paying themselves. However, if your business isn't paying you, it's running you. This must change.
To shed light on the issue, consider these statistics: 38% of small business owners don't take a salary because they reinvest profits or cover operating costs instead. Additionally, it typically takes 12 to 24 months for a business owner to consistently pay themselves a salary. However, the key isn’t just financial stability; it’s about establishing consistent systems.
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**Building a System That Pays You**
- **Treat Owner Pay as a Fixed Expense**
Make your compensation a regular line item in your budget, just like rent or payroll. This way, your salary isn't just an afterthought; it's an operational necessity.
- **Start Small, But Start Now**
If you’re starting small, aim for 3-5% of gross revenue to be your salary. As your business grows, aim to increase this percentage gradually.
- **Separate Owner Pay from Profit and Taxes**
Understand that owner pay compensates you for daily efforts, while business profit is derived from risks. Avoid mixing the two, as it skews performance indicators and makes cash flow management tricky.
- **Automate Transfers**
Set up dedicated accounts for operating expenses, owner pay, profit, and taxes. Automate transfers to ensure your salary is prioritized, removing emotional hurdles from the equation.
- **Review Cash Flow Weekly**
Regular review of your cash flow helps keep you proactive rather than reactive. Set aside time every week to check your financials and make necessary adjustments.
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**Bonus Tip: Reward Yourself with Quarterly Bonuses**
Consider setting up a quarterly performance bonus for yourself. This not only acknowledges your hard work and risks but also provides an additional incentive for maintaining and improving business health.
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**Embark on Your Journey to Consistent Pay**
As you venture into ensuring your business pays you first, remember to establish robust systems. Treat your pay as a non-negotiable part of your budget, review your cash flows regularly, and reward yourself systematically for your achievements. Join our live shows every Tuesday at 8 PM Eastern Time, or sign up for my one-on-one coaching services to delve deeper into your business health.
Now go forth with grit and determination to ensure that you not only survive but thrive with consistent pay. See you next week in the trenches!
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Be sure to visit [gritandgrowthbusiness.com/live](http://gritandgrowthbusiness.com/live) to join our sessions or [gritandgrowthbusiness.com/coaching](http://gritandgrowthbusiness.com/coaching) for personalized assistance. Remember, you deserve to be rewarded for your hard work, and it's time to make it happen. God bless and have a great day!
Ralph Estep Jr.
Author, Father, Husband, Rancher
Ralph V. Estep, Jr. is a highly accomplished professional with a diverse background in finance, accounting, technology, and entrepreneurship. As the principal at Saggio Management Group, Inc., he has demonstrated exceptional leadership and expertise in various roles throughout his career.
Ralph's educational journey began at St. Mark's High School in Newark, Delaware before attending the University of Nebraska where he was an esteemed member of the Cornhusker Marching Band and had the privilege of performing at the Florida Citrus Bowl in Orlando.
Continuing his pursuit of knowledge and excellence, Ralph earned a Bachelor of Science Degree in Accounting from the University of Delaware. He further expanded his academic achievements by obtaining a Master's in Business Administration from Wilmington University.
Throughout his professional journey, Ralph has been recognized for his outstanding accomplishments and commitment to excellence. He is a member of prestigious organizations such as the Golden Key National Honor Society and Beta Gamma Sigma International Business Honor Society.
With an extensive range of professional designations including Licensed Public Accountant (LPA), Accredited Business Accountant (ABA), Accredited Tax Advisor (ATA), Accredited Tax Preparer (ATP), and Internal Revenue Service Registered Tax Preparer (RTRP), Ralph possesses comprehensive expertise in tax preparation and financial management.
Beyond his impressive qualifications, Ralph has actively engaged with various community programs as bo… Read More
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