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Why wouldn’t you value your own time and not give yourself a salary?
Many contractors go into business with one main purpose in mind and that is for financial security. Why do so many contractors forget to pay themselves a salary? As the business owner, you should get paid for your efforts. If you don’t pay yourself you will then struggle to pay your bills and put food on the table, and it eventually leave you with financial problems. In addition, it will affect your health as it will cause you stress and possibly even heart problems. Pay yourself what you are worth, it makes good business sense. Too many times contractors will either not give themselves a salary or they find themselves getting paid less per hour than their own team members! If you pay yourself for your efforts, you will find yourself more motivated to be focused on the growth of the company, and finding ways to make more sales.
Here are three things to consider when starting to pay yourself:
1. How much to pay yourself
When you are determining how much to pay yourself look at your cash flow projections and profits. Once you have figured out how much you need for operating funds, you should then put in your salary, which is your basic worth. How much you should exactly pay yourself will be dependent on the company’s development, but you should at least aspire to get your markets worth. Along with your market worth, you also include in your wages, the duties you perform, and the amount of time you spend working in the business.
2. Profit isn’t salary
Your salary shouldn’t be part of your profits. Profits should be calculated after you have paid yourself, because after you pay yourself you may find that you are actually operating at a loss. Don’t make the mistake of failing to value your own time in the same way you would value an employee’s time. Your personal financials should be separated from the business because you deserve to pay yourself a salary that is deserving of your time. If you end up pocketing wrongful profits, then how will you ensure your business’s longevity?
3. Set yourself a regular salary payment
This payment should be what you pay yourself every two weeks, or monthly. The payment should be consistent so that you can include that as part of your overhead cost. You don’t want to be paying yourself as much you want as this could cause you tax problems, and it can lead to incorrect financial numbers. Of course, with time as your business company grows more profitable you can than make changes to reflect that, but make sure there is a pattern.
If you want to succeed as a business owner, you need to start looking at the bigger picture and playing smart. Smart means that you are paying yourself a salary.
Ask yourself, these 2 questions:
#1) Are my wages equal to the duties that I perform?
#2) Does my pay reflect the amount of time I have spent in the business and the monetary investment I have put into it?
If you have trouble determining how to answer these questions, then maybe you need to evaluate why you came into business for yourself in the first place.
The Contractors Profit Plan is a FREE WEBINAR we’ll be hosting on Tuesday, Dec 12th @ 10am EST