Secure your paycheck so you can secure the future of your business.
A version of this article first appeared in Forbes.
Do you feel secure about your own paycheck as the CEO of your small business?
When I first got started, there was definitely a period of time where I was not paying myself.
Figuring out how to allocate some of your revenue so you as the CEO and business owner have a secure paycheck can be really tricky.
According to (Payscale), U.S. small business owners make, on average, $70,300.
Many CEOs I work with take little to no salary in the first years of running a business.
Even with Foot Traffic being less than 5 years old, I still make sure I’m paying myself – As I mentioned, this wasn’t always the case and the Profit First method was a game changer for me.
The underpaid and overworked entrepreneur scenario is problematic from a couple of different angles.
The most obvious reason, of course, being the importance of making ends meet, paying bills, hiring employees, and living a comfortable lifestyle.
The other, perhaps not so obvious reason, and the motivational force behind why I’m so passionate about helping others pay themselves fairly is the risk of needing to hire a replacement.
Most business owners want what they’ve built to succeed them. Securing a reasonable take-home pay for the CEO means that if something should happen to him/her, the business could hire a replacement and continue supporting customers and employees.
So, what’s a small business owner to do?
There are a few important strategies you can use to build your safety net of funds that are allocated to you as the small business owner.
The first and most important would be getting crystal clear on the options available to you for receiving a paycheck.
The most common ways are through an owner’s draw or a salary.
Generally speaking, an owner’s draw is best for those registered as a sole proprietor, partnership, or LLC. A salary is usually best for corporations or LLC businesses taxes as a corporation. (Nerd wallet)
I highly recommend consulting your CPA to find out the best strategy for you. Picking this on your own can result in less than ideal situations. If you don’t fully understand the differences you may be paying way more in taxes than needed.
Nerd wallet offers entrepreneurs this handy breakdown of the pros and cons associated with the two options.
Especially in the midst of a global pandemic many business owners are struggling to balance paying themselves with payroll and other expenses.
There are several ways to plan for the unexpected which is essential for long-term growth.
My most important piece of advice? Don’t put all of your eggs in one basket.
There are many different ways to accomplish this.
How to Diversify Your Revenue Streams in Your Small Business to Secure your Paycheck
- Include digital offers in your business even if you’re a brick and mortar.
- Creating digital offers such as self-paced courses, downloadable resources, membership sites, etc. is easier now than ever.
Not sure where to start? Check out this episode, Taking Your Brick and Mortar Online. - A simple sales funnel (the customer journey from cold lead to paying customer) can be automated online and is the key to generating consistent leads and income.
- Creating digital offers such as self-paced courses, downloadable resources, membership sites, etc. is easier now than ever.
- Joining affiliate programs is an additional way to authentically promote products you already use and love, adding another source of income to your business revenue stream.
Once you’ve decided how you’ll pay yourself (salary v. owner’s draw) and have enough revenue to cut yourself a portion of your profits, there are…
3 important factors to keep in mind
- Pay yourself by percentages.
- The benefit of setting a percentage, say you start with 3%, is even if you aren’t in a place to raise the percentage, you still experience a pay raise incrementally with any growth in revenue. As that percentage feels less and less risky, you can gradually increase it.
- Smart hiring decisions and effective team management.
- According to the U.S. Department of Labor, a business loses 30% of an employee's first-year earnings with every hire they don’t retain. Taking the time to implement a hiring strategy that brings in the right people the first time is a game-changer for business security.
- Strategic and intentional savings
- Ensure all employees, including the CEO, receive just compensation. Using a separate business savings account alleviates stressful feast and famine cycles so even in slower months the pool for paychecks is still there to draw from.
Putting these pillars in place to protect your own income will put your best foot forward on that path to entrepreneurship being all you hoped it would be.
Looking for other ways you can be the very best CEO you can be?
(One of my mottos: The business can’t grow bigger than the CEO)
The Foot Traffic experience is all about allowing you to simplify and systematize your business. Ready to learn more about what that looks like for you?
Our team has time on their calendar to talk to you about our programs! Book a call here
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