Although my main interest is in speaking professionally, I also enjoy personal coaching to help individuals reach higher levels in their lives and careers. The personal satisfaction I feel when they are able to realize their life and work-related goals and dreams is absolutely amazing. Plus, it has been a wonderful opportunity to work one-on-one with some really cool people.
Recently I had been in conversation with someone whose business was gradually expanding. As his business and revenues grew, so did his tendency to take money out of his business and use it to pay for personal expenses. Perhaps at some point you have you found yourself doing the same thing. In other words, do you use your business as an ATM, withdrawing cash whenever you need it?
Here’s a little bit of tough love that I want to share with you: your business is not an ATM. It isn’t loaded with unlimited stacks of money just sitting there waiting for your withdrawal. There isn’t an armed security officer that is going to show up daily and replenish whatever funds you take. The money you remove from it is gone, so if you fall on hard times, you’re not necessarily going to have that safety net that will protect you if your business affairs start to sour.
Look at it this way, if you worked for someone else (remember those days?) and asked for a raise, what would happen if they didn’t give it to you? What if your boss told you no? Would you just take the money anyway? No, of course not. You wouldn’t have that option. Well, the same is true when you are in business for yourself. Just because you want more money or have other expenses to pay doesn’t mean that you are permitted to take it from your business earnings.
When considering what to pay myself as a salary from my own business, I sit down and think about what amount I would have to spend to hire someone to do my job for me. Whatever figure I arrive at, that is what I get as a paycheck. Nothing more. Nothing less.
If you are struggling with the same issue for yourself, unsure how much money you can be taking out of your own business on a regular basis, I recommend that you follow my lead-take for yourself what you know anyone else doing the same work would be fairly paid. Research similar companies that are roughly the same size as yours and see what their CEOs make. Be sure to search in the same industry so that you get a relevant comparison and aren’t short-changing or overpaying yourself as a result.
Of course, in order for this to work, for you to have the best life possible on the salary that you’ve set for yourself, budgeting is critical. Hopefully you already do this in an effort to effectively deal with the financial ups and downs commonly associated with owning your own business. However, if you haven’t yet, now is a great time to sit down and look at your estimated expenses and revenues and figure out how much money needs to go where and how you’re going to make it work.
This will help put you in a better position mentally and financially. You can move forward without surprises, already knowing how your money needs to be allocated and what extras you can and cannot afford. Your business with thrive and grow. As will you.