A version of this article was first published on DesignGood’s blog.
As the final part of my series on creating business financial alignment (you can read Part 1 here and Part 2 here), let’s dive into the ohhh-so-important topic for businesses: paying yourself as the business owner!
Most people bootstrap everything the first few years in business. And, often as part of that bootstrapping, as the owner you don’t pay yourself at all, you pay yourself a fraction of what you would be paid working for someone else, or you pull money from your business accounts only when you’re desperate. All three of these paying yourself options quickly pull you into a negative cycle. (Unquestionably, becoming a business owner isn’t for everyone!)
But, one of the things I find really interesting, is that even when a business has become more established and financially stable, many business owners have difficulty moving away from their rote financial patterns. In fact, when I take on a new Virtual CFO client, one of the first things I look at is how they pay themselves–because often this area needs work. To me, the the business owner is the lifeblood of their business so I believe it’s crucial to bring health to paying yourself.
So, on that note, I’d like to you ask you as part of this series on business financial alignment: Do you pay yourself well? Do you feel good about your pay? Or, are you possibly stuck in an underpaid, unprioritized cycle? Whatever your answers, hold onto those and we’ll circle back.
WHY YOU SHOULD PAY YOURSELF WELL
You might wonder what’s the big deal about paying yourself well? Well, for starters, no one contributes to your business as much as you do. Not only have you historically given it your time and creative energy, but you’re the one shouldering all the responsibility.
By giving yourself a regular, well-paid salary (or draw depending on your business setup), you’re acknowledging your contributions and importance. From a financial standpoint, this allows you to live life with more ease and confidence. From an energetic standpoint, you’re claiming your worth. You’re saying: “Yes, my contributions are important. I’m great at what I do.” And you’re allowing the business to give back to you just as you’ve given so much to it.
PRIORITIZING PAY TO YOURSELF
Once you move into paying yourself well, put your payment on a regular schedule. Cash flow patterns can be figured out enough so that you can regularly pay yourself monthly or biweekly. (If you’re not sure about improving cash flow, talk with a financial pro because every business has financial patterns–you might just need a little help finding and understanding them.)
As the owner you want to prioritize paying yourself; you don’t want financial “scraps” from your business.
Maybe you’re heard of Parkinson’s Law which states that whatever time you’ve allotted for something, the time it takes you to complete that task will expand to fit that exact time. Similarly, by giving yourself a set dollar pay amount and regular payment schedule, you’ll find that either more sales come in or you make choices that allow you to reach the pay goals you’ve put in place for yourself.
The largest benefit to prioritizing paying yourself is namely that you begin to show up better. You’ve essentially put on an oxygen mask. With your needs taken care of, you can more easily show up as your higher self for employees and clients–which only helps to further establish business financial alignment. You’ll likely feel more passionate about your work and have more creative flow. Essentially these actions say:
- I AM the business owner.
- I’m successful.
- My business is successful.
- My business takes care of me.
- I am the leader here.
So what do you think? Are you paying yourself (enough)? Feel free to send me an email about your thoughts on this topic.