by: Jan Loyola
Are you a startup founder, business owner, or entrepreneur? Then this is probably the most important question for you: Are you paying yourself what you are worth? A lot of business owners make the mistake of not giving themselves a specific salary, especially when starting up. All the profits you get from your sales leads should be properly allocated for business operations, employee salary, and emergency funds. Even if you are the owner, you should consider your work as professional services and give yourself an employee’s salary.
Here’s why you need to give yourself a salary:
So you won’t use up all your finances.
You know what this means. Day in and day out you strive to turn your business into something profitable, trying out new marketing strategies and ways to generate more sales leads. You may hire a home-based telemarketer to be your assistant at first, but when that person fails to deliver, you decide to hire a telemarketing call center. Doing this of course uses up your finances, and because you still have to find a steady flow of sales leads, you have no means of getting cash flow into your reserves. Eventually, you end up using your own savings. In this scenario, you would certainly dry up your personal funds. On the other hand, if you were paying yourself just as you did that telemarketer or call center, even if your business fails to become profitable, you would still have money remaining in the bank.
To accurately measure business net income.
A business is not measured by how much you can get, as the owner. It is measured by how much the business earns minus all the expenses of operations, or the net income. If there is no clear distinction between how much you pay yourself and how much your business earns, how are you to accurately measure your annual income and expenses?
To ensure you have money for business emergencies.
Once you’ve calculated all the operational expenses of your business and subtracted that from your gross income, what is left doesn’t all go directly to you. Or rather, it shouldn’t. By paying yourself a specified salary every month, you will have extra finances should an emergency occur at the office. For example, your sales leads generation team informs you that your telemarketing list is already outdated, but they do not have the time to spend on validating every contact information. So, you hire a lead generation firm to do this for you without needing to dip into your own pockets for the money.
Properly allocating your income even before you start earning those millions is a sure fire way to become successful.