Paying Yourself
My grandmother, who owned a small retail store for more than 40 years, used to tell me that when it comes to entrepreneurship the owner was always the last to get paid. Despite the fact that many entrepreneurs start out with dreams of large paychecks, it turns out my grandmother is right. The business owner may get the spoils of the business but only after all bills have been paid, employees have been paid, and the taxman has been paid. Anything that’s left over (ha!) is fair game. In the last few weeks I’ve had multiple conversations with small food business owners about just this topic and it got me thinking. What do you do about paying yourself? Are you forgoing payment right now in order to fund the business? Are you holding off hiring employees because you don’t have the money to pay them and pay yourself? Or do you collect a regular paycheck and, if so, how do you determine what your time is worth? I’ve got a few thoughts on all of this that I’ll share later but I wanted to get your take on it first. Care to share??
I am definitely in the forgoing payment part of my business, everything gets funneled right back into the biz….sigh.
trust me – you’re not alone!!
Hello,
I’m from Brazil and I’ve been following your blog even published his text because I found very interesting.
I have a small business in the area of artistic cakes at an early stage and work out as part of my salary and all won invest in this business.
The question is, how long?
hugs,
Gisele,
How long it will take to make money – which I believe is what you’re asking – really depends on a number of factor but, a nutshell, what your revenue is (ie, your sales) versus what your costs are. The first part is making the first part outweigh the second though then there’s all your ‘marketing’ type expenses which most small businesses plow any profits back into. I wish I could say there’s a magic formula for when the owner starts making money.
May be useful to find money to pay yourself for an allotted runway (3 months, 6 months). Just the bare minimum you need.
This can come in several forms – investment, line of credit, credit cards, etc. This allows you to focus on work and use your profits on your company – marketing, hiring, etc. Never underestimate the amount of marketing it takes to spend when you’ve started a venture – particularly food.
Its started like that…
For a business to thrive the owner has to accept that the real profits will come later on. Until then most of the money goes back into business, in which it may grow.