“Once upon a time, a young, talented, and opportunistic individual decided one day it was time to leave a corporate life of serving others and leap into the world of entrepreneurship. With that life would come the freedom to work any hours desired, have control over every situation, pick and choose clients, and be spoiled in riches. The end.”
A beautiful story, isn’t it? In reality, entrepreneurship is hard. It involves long hours, taking on clients of all sizes, doing whatever it takes to increase the bottom line, and often holidays, time off, sleep, and yes, a regular pay cheque.
So, how do you make the transition from paying into your company to paying yourself? By having the right revenue equation, building a process to pay yourself first (after the CRA of course), and by building and committing to a realistic budget.
WHERE TO START?
As entrepreneurs, we’re good at juggling a bazillion hats (or spinning plates on sticks while riding a unicycle), which means we do a lot of jobs for our business that are not necessarily our areas of expertise. Make a list of every task you do for your business that you would eventually hire for – this is the best place to start paying yourself. As your business gets accustomed to spending the money for these tasks, you’ll be able to hire for that position a lot quicker (or at least subcontract it out).
ARE YOU HANDLING SALES?
The next best place to look to your business for pay dirt is the sales floor. If you’re instrumental in generating leads, working with your potential clients or customers and closing deals then you have earned yourself some commission my friend. Build yourself an incentive strategy that includes a sales commission and pay yourself with every deal you close. Fine tune it as you scale your business and you will end up with a model that will enable the addition of more sales staff.
ARE YOU CHARGING FOR TIME?
One of the fastest ways to ensure there is enough cash in the register to pay yourself is to charge properly for your services. For example, if you offer graphic design services you need to account for not only the time you spend on the work being completed, but also the administration time that is typically non-billable and the dreaded run-on meeting time. While the the best way to handle this is to eliminate billing by the hour and begin billing for value, sometimes finding the right equation for value-based pricing is a challenge on it’s own.
DO YOU HAVE A BUDGET?
Every single business needs to be running on a budget. An established, dollars in dollars out budget. And this must include the costs of getting the work done. A solid budget will eliminate the questions of whether or not you can afford to pay yourself, and as an awesome bonus, it will give you your profit and loss numbers to ensure that you do indeed have a viable business in the works. If you don’t have a budget established, speak with your accountant and make one.
At the end of the day you’ve chosen the entrepreneurial path for a reason and dollars to doughnuts I bet its not financially driven. That being said, in order to afford to be an entrepreneur, you need to pay yourself well so that it is worth dealing with all of the stresses that come along with it.
Go get paid.
Originally posted to Intuit QuickBooks