Money… the magic word on every business owner’s lips.
You may not go into business with the sole purpose of making money, but it should be one of the things you strongly consider.
What you earn can feel like a bit of a taboo subject and is not talked about publically. But, it should be talked about within your business. Here’s why!
When I meet with a prospective or new client, one of the first questions I ask them is are you making money? The second question I ask is, are you paying yourself what you should be earning in the role you are performing?
Often the answer to question one is that we are not sure, or our accountant tells us we are doing well but we never have any money.
The answer to the second question ranges from, We are just trying to get the business running before we take anything out, to, we are paying ourselves but not as much as we would be if we were paying someone else to do the role we are performing.
Occasionally they say yes we are to which I give them appropriate praise.
One of the very common issues when people start a business is that they have not put together enough capital to start the business off properly. So then the first thing that goes out the window is making sure that the person taking all of the risk in the business is getting paid appropriately i.e. them, the business owner.
Unfortunately this can filter through into their pricing model and they get awarded work at a much lower rate than it really costs to do the work and make a profit. Or, they sell products at a much lower price than they need to to make an acceptable living.
It is much easier to get all of the components to create a successful business in place at the beginning, rather than try and correct things further down the track when customary process has become the norm.
The Business Plan.
An important component of setting up a viable business is planning to pay yourself properly. You also need to put the in place a robust business plan that ensures you have sufficient working capital, a marketing plan appropriate for the type of business, budgets and cashflow projections that support the business operations, as well as various other components.
Unfortunately, putting a business plan together is not everyones area of expertise. You have the ideas, but may be uncertain of how to compile that into a business plan that has all of the components required covered off.
Luckily, there are experts that can help you assemble a practical business plan that is designed to help your business pay you a fair wage.
If you need reassurance, guidance, or some hands on assistance in preparing your business plan and covering all angles, go to someone with experience. Graeme from Biz Assist has years of experience in these matters so feel free to make contact with him if you need help. Reach out today.
Great advice as always Mr Bratty!
Do you recommend a certain percentage rate to be used to work out how much to pay yourself?
It’s not some much a percentage but more what you would have to pay someone to do your role if you were not doing it, then you should also make profit on top of that which is the return you get for taking the risk of owning a business.