Take a minute to think about the instructions you are given when you board a plane and are readying for take-off… in the event of loss of cabin air pressure, place your oxygen mask on yourself before helping others. The logical side of my brain understands the rationale behind these instructions, but the father and husband in me wants to put my loved ones first… always. However, in doing so, I might be putting us all at risk.
The same can be said for your business. If you are giving too much back to the business, financially, you might be working at odds with what is actually best to keep your business alive and thriving. As such, every new business owner should institute a policy that has them collecting a regular pay cheque, as if they were an employee, as soon as possible. Pay yourself first.
Of course, the needs of the individual must be balanced with the needs of the business; and as a business owner, it is critical that you understand where that line resides. Understanding your personal financial priorities (what you need to survive), versus business priorities (what the business needs to survive) should be something that is addressed in the early planning stages, creating a strong financial outlook for the company.
Depending on the level of investment and initial capital acquired, the start-up phase of any new business will likely see a less than equitable balance between what’s coming in and what’s going out. That will impact the ability to take a fair salary. However, over time, the inability to pay yourself a regular, and market-value salary, could point to a significant flaw in your business plan. (See my writings on the importance of the business plan).
Let’s say your business is bringing in the money required to survive and thrive, but you haven’t yet taken a fair salary for yourself… why? Putting a priority on your own, and your family’s financial health, isn’t a sign of a weak entrepreneur, it is the sign of a financially healthy business.
Let’s look back to the beginning. You hopefully went into business for two reasons: one, to make money; and two, to contribute in some way that brings fulfilment. If you can’t afford to pay your own salary, simply put, you won’t survive long enough to do either. Going without for the seemingly benefit of your business may seem noble, but it is not realistic, nor is it healthy for your ultimate success.
As the saying goes, “Don’t put all your eggs in one basket.” If your business should stumble and you have your entire financial nest egg wrapped up in that business, where does that leave you?
While it is important, and realistic, to note, that entrepreneurs won’t likely take their full share out of the business at first, but rather re-invest back in their employees and business growth, it is critical that, as a business owner, you understand your own market value. Take note of what you pay yourself against what would be a fair salary in today’s market… the difference (if you are underpaid) can be chalked up to your sweat equity in the company.
About Roy Murad
Roy Murad is a father, husband, business advisor, investor, advocate for new business ventures, and consummate entrepreneur. Over the course of 35 years building businesses, guiding companies and identifying strong investment opportunities, while nurturing a thriving family, Roy Murad has amassed a wealth of experience; experience, that may be of value to others who are looking to shape a balanced and successful life experience.
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