Don’t Forget to Pay Yourself When You Start a New Business
You’ve started a business. Secured a few clients. Generated some cash flow.
You’ve paid the bills. You’ve got some visibility into the future. Business is growing steadily.
You’re investing more into the business. A few extra dollars go into marketing. You hire a sales person to help out. Or maybe you finally start a business blog with the help of a blog consultant.
You’re workload is increasing. But you’re happy about that because it means you’re heading in a good direction, right?
Question: Have you paid yourself yet?
Oops.
Too many entrepreneurs forget to pay themselves, even something small, when they’re getting their businesses off the ground.
I completely support re-investing in your business; that’s critical to its success. But you can’t live off future possibilities forever. Promise and opportunity don’t pay the bills. You can’t be chasing the proverbial carrot non-stop…every so often you need to take a wee nibble.
So take out some money from your business when you can. As soon as you can afford to pay yourself regularly, even if it’s $100/month, do it. It’ll make a big difference emotionally. It’ll help make your business feel tangible and valuable. That little bit of money isn’t the only value in your business - far from it - but it’s nice to see the money go into your bank account just the same.
I agree Ben about the need to pay yourself as an entrepreneur - the bills have to be paid from somewhere.
What I will challenge is your comment “It’ll make a big difference emotionally”. This sounds like a sweeping statement, along the lines of “all entrepreneurs need to see the money in order to feel good about themselves and the business”. I know that self-employed people have their sense of self-worth tied to the business and if the money isn’t coming it has an effect on how they see themselves. But the emotional connection to the money isn’t there for everyone.
First and foremost the reason to pay yourself is so that you can stay working for yourself. If you don’t pay you (and you can’t pay the bills) then you will have to give up the business and go back to having someone else pay you.
Thanks for the comment Leah! I’m all about sweeping statements! *chuckle*
The emotional connection might not be there to the money, certainly money isn’t the only reason to do anything. In fact, I’ve read in numerous places that MOST people can make more money as employees vs. entrepreneurs / self-employment.
If you’re struggling, and business isn’t booming, or you’re just starting out, I do think a bit of money in your pocket can generate a positive, emotional response to the business and serve as a motivating factor.
Thanks again Leah!
I completely agree with Ben because that is exactly how I felt when I first got into business for myself. I kept re-investing the money back into the business and felt bad about paying myself.
However I didn’t feel like I was getting anything out of all the hard work I was putting in. As time went by I started taking money out ever week. Not a lot, around $100-200, depending on how the week went of course. I realized that by paying myself I was more motivated and became much more involved in the business. I’ve been doing well ever since.
This is not to say that paying myself was the sole motivating factor, but it did play a major role when I needed it, in the beginning.
Hi Mind2Print - thanks for the positive feedback. I think you’ve hit on the key point which is “paying yourself isn’t the only motivating factor.” If it was, well, you probably wouldn’t have gone into business for yourself. It can’t just be about the money. But even a little bit of money in the pocket has a big impact on justifying the direction you’ve gone in.
Thanks for the comment, hope to see you stick around!
[...] Chris Johnson reminds us that it’s important to pay yourself first. He’s speaking about the fact that many people spend without tracking their income and are left at the end of the month breaking even, just getting by. He’s got some ideas on doing more than that. I’ve touched on this subject before as well with, Don’t Forget To Pay Yourself When You Start A New Business. [...]
I came across your blog on the Entrepreneur Carnival, and was compelled to click. This represents my life! I reinvest almost everything back into future growth, and at the end of the day I am exhausted. My business has grown faster because of it, but it does feel like I am working for nothing most days. Even when I make a huge profit, I still put it towards seomthing business related.
I am going to take your advice and take out $100 a month to start with. Thanks for the awesome advice!
Jamie - congratulations on growing your business quickly. You must be doing something right!
Now is the time to strategically re-invest - both into the business AND yourself.
Enjoy the $100…and let me know how it goes!
Personally, I feel the critical point is whether you have drawn a line between yourself and your business. From a business perspective, you need to have a good plan on how you are going to run your own business. Work out what percentage of profit you are going to reinvest back into the business and how much you are going to play “employee” which is yourself. This sets a good structure of your business even if you decided to play yourself only $100 per month.
Bernard - I agree. It’s a good idea to think early on about drawing that line somewhere, so that you don’t get into a situation of forgetting to pay yourself. Thanks for stopping by and commenting!