Readers Question...
I'm finally making a little bit of money in my small business but I don't know how to manage it. So I have two questions. 1. When should I pay myself? 2. How much should I leave in the company?
Thanks, Mary Anne
Roxannes' Answer...
Great Question! The reason I say that is that too many women business owners struggle and wait too long to take money from the company OR they spend it all which is not smart.
If you never reap the benefits of being a woman business owner, you'll get tired of it pretty fast. What happens is you start to lose your enthusiasm. In short, there's nothing to fuel your desire to work hard. Plus, you're not treating your business as a real business owner would.
Instead, make a plan. Because I have no idea what your profits are, I'll use a rule of thumb I used as a financial consultant with my clients. ALWAYS pay yourself first by setting aside 10% in savings for your long term goals. This could be a retirement or other investment account. I've seen many clients get rich over time this way.
Then, save 10-20% for short term needs. I've also seen companies go bankrupt when they hit a dry spell only because they had no savings.
For a business, set aside 5-10% for marketing to bring in more business as it's crucial to keep growing. About 40-60% of business income should cover your expenses including salaries. Pay yourself a small amount as a bonus and use it to just have fun! I
f you enjoy the results of your hard work, you are likely to continue. We use to set aside money to take a trip with our team, but I always paid myself a little bonus too for each sale I personally brought in. Then I might go buy a new pair of shoes or go out to a nice dinner as a reward to myself. It keeps you fresh and enjoying life! That helps keep your enthusiasm high and many a business has been built on enthusiasm.