Regardless of what type of business it is, it is always in the interest of the owners to start making a profit. However, the majority of newly started businesses take time to reach the level of paying the one who actually runs and owns it. A lot of owners will defer their payments while they try to get things up, running, and profitable.
That’s a mistake that can put you under great financial stress, however. Here, we’re going to look at why you should make sure that you’re taking an income home with you, and some ways you can make sure that it happens.
Why you should make sure you take home some money
First of all, you need to consider the advantages of paying yourself, first and foremost. You might think you will be okay with taking an owner’s draw from the business every now and then, but the truth is that this can make it difficult to separate your personal finances from your business finances.
You can take out money that you really needed for the business or do the opposite and not take out enough so that you’re left in financial dire straits. The financial stress of living an overly frugal lifestyle can start to take its toll on your decision-making abilities, too.
When you start a business, usually, most of the money that you get, either through your capital spending or through revenue, is going to be directed right back into the business. There are initial investments to make, as well as bills and overheads to pay. However, you might be able to secure some profit and your own pay if you start with low overheads to begin with.
One of the easiest ways to do this is to start your business online rather than in an office so that you don’t have to pay as much on property rental and other related expenses. Of course, this can’t be done with all types of businesses, so consider what low overhead strategies might apply to yours.
Buy an established business
Another way to start getting yourself an income and perhaps even make your way to profitability more quickly is to skip the entire start-up section of the business lifestyle. There are two ways to do this. Franchising can help you gain access to a well-known brand, but also means you have less control over many of the factors of that business.
Finding a biz for sale, however, can allow you a much greater degree of control. With a more established business, it will be easier to find room to pay yourself, as well. You just need to closely inspect any business you’re thinking of buying to make sure that it is as good a deal as it markets itself to be.
Set a salary for yourself
One of the most important things about paying yourself an income is deciding what kind of income you pay yourself. It usually comes down to whether you take an owner’s draw from the entirety of the money that business owners, or if you take a salary.
Paying yourself a salary isn’t as flexible, but it is something that you can budget into the business more reliably and takes the financial stress of worrying about how much you should take out entirely out of the equation. Setting yourself a salary allows you to have one less problem to deal with so that you’re better able to focus on running the business. Even if you’re paying yourself close to minimum wage, make sure you’re paying yourself regularly, at least.
Always consider return on investment
If you’re spending money in the business, then you should make sure that you’re always spending it in a way that’s going to get a return. To that end, you should think about what upgrades your business is going to need and calculate the return on investment on them. How long is it going to take to start seeing a return?
There are some costs you might have to bite just so your business can remain operational but, in general, you should always focus on the investments that are going to pay you back more reliably and more quickly so that you’re not taking away from your own salary or draw to fund the business.
If you want to make sure that you’re able to focus on the success of your business, pay yourself being hungry for success is good, but trying to work on an empty stomach is often fraught with danger.