Last month, I enjoyed a glass of wine with one of the community members of F&TA while she was visiting NYC. I’ve been following her for about a year now and have really seen her business grow and shift. We were chatting about revenue and the importance of paying yourself first. She shyly admitted that she had not been paying herself; in fact she had never paid herself a salary and she had been in business for several years.
I reminded her about something that my consultants said to me when I was scraping by: “It’s not a business if you aren’t paying yourself. You just have an expensive hobby!”
I was married when I started my first business (and so is the member above). The dual/ additional income took a little pressure off when I was figuring out my cash flow and income necessary in order to pay my salary. In fact, for many years I didn’t really pay myself a salary at all, I just took a draw when I needed to pay rent or buy food.
Honestly, it wasn’t until I moved to NY that my accountant urged me to start cutting myself a paycheck, even if it was nominal. Eventually with the help of my consultant and the support of my accountant, I decided that I was going to do whatever it took to pay myself a salary like the CEO of a company should.
(Think about it, the CEO’s of major corporations always pay themselves!)
I find this topic fascinating because I talk to so many designers who are NOT paying themselves. When I started paying myself, everything changed. Most importantly, I felt financially secure and stable enough to run my business detached from my emotions (very important trait for you budding CEO’s out there).
So I wanted to tell you the 5 actions that I took to guarantee that I could pay myself a salary::
1. Have a clear picture of what you need to earn!
My friend Karie Hill who is also contributing to our Multiply Your Profits course talks about having a clear idea of what your salary needs are. If your company is growing or just starting out, you may have to take a bare bones salary to start. In order to understand what you need to live, you need to understand what your expenses are. Write down everything you spend money on (preferably in an excel sheet or budgeting program) so you understand what you really need to live the lifestyle you desire.
2. Work Backwards
The concept of working backwards is a really important one to understand how you are going to generate the revenue that you need to thrive in your business and to pay yourself. This requires taking all of your business expenses and adding in your salaries they figuring out what your profits are so you can cover your monthly “nut” (as I like to call it).
3. Set Revenue Goals
Now that you know what you need to make, you can start setting your goals so that you can start paying yourself. Setting goals alone is not the answer. Remember a goal is just a goal if there is no inspired action behind it.
4. Track Weekly
Make sure you are tracking your progress each week so you know you are on target. Tracking allows you to adjust when you are behind and allows you to revise when you are ahead. Plus, staying focused on your salary helps the universe align with you so that you stay on track.
5. If you aren’t there yet, commit to yourself
I know what some of you might say; well I’m not there yet! Here comes your commitment to you. You must stay committed to making this work. Celebrate each tiny step when you make headway or increase your sales.
Remember the words my consultants told me all of those years ago:: if you aren’t paying yourself, you don’t have a business. Just an expensive hobby!
My life literally changed when I had consistent income flowing into my bank account. Trust me, yours will too.
We want to hear from you! Tell us the following in the comments below:
1. Are you paying yourself a salary?
2. If so, how did it make you feel when you shifted from hobbyist to business owner?
3. If not, what is holding you back from taking the leap? Fear? Setting goals? Taking inspired action? Fill in the blank here…
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