I absolutely LOVE being an entrepreneur. I wake up every morning and do what I love. I get to control my destiny, and I never have to worry about how many vacation days I have.
I gave up a salary so that I will never have to worry about a cap on my income.
BUT just because someone else isn’t paying you a salary, does not mean you shouldn’t be paying yourself a salary.
I see way too many solopreneurs who are not taking a salary from their business. They may take cash out here and there, but they are not regularly paying themselves a set amount on a bi-weekly basis.
So how do you start paying yourself regularly? A great first step is to set a salary goal. How much do you need every month to live? As a minimum baseline, your salary should be enough to cover your living expenses – pay your mortgage and insurances, buy your groceries, etc.
As your income grows, your salary can support your lifestyle, upgrade your lifestyle, AND allow you to save for the future – contribute to your retirement accounts, save into your travel fund.
Once you know how much you’d like to pay yourself, it’s time to look at the numbers. I know, the dreaded thought of actually looking at how much you’re making, how much you’re spending, and how much you have left over at the end of the month.
If you have the cash to cover a salary – start paying yourself! Pick two dates a month that are for payroll. Make sure those dates are in your calendar. When that day comes, go into your business bank account and transfer money into your personal account.
If you don’t have enough cash to pay yourself, it’s time to get to work on either decreasing your expenses or increasing your revenue.
Some owners are over spending. Take the time to evaluate what your spending money on in your business. Is it something that will generate a return for you, and at what point will you be receiving that return? I get it, you have to invest back into your business to grow, but let’s be smart about it and invest the right amount at the right time.
Some owners aren’t focusing on revenue. Are you doing enough RGA’s – revenue generating activities? Think about your current business. Look at where money is coming from now. Sometimes there are opportunities for new offerings to current clients. Other times, we’re just not charging enough. Many entrepreneurs struggle with mindset around selling and asking for business.
Regardless of how much you can pay yourself, it’s a good idea to get in the habit of transferring money from your business account to your personal account on a regular basis.