How To Pay Yourself As An Entrepreneur

As an entrepreneur, it can be challenging to determine how to pay yourself and how much to pay yourself. You may be tempted to reinvest all of your profits back into your business thinking this is the fastest way to grow and then you will pay yourself. Or you may be on the other side where you actually need your business to pay you from the beginning. By balancing paying yourself and reinvesting back into your business, your business will not only start to thrive, but you will feel the passion for what you do continue to flourish also.

When it comes to paying yourself, I always recommend to work it backwards. Start with what you want to pay yourself and how much you want to invest back into your business each month. Once you know those numbers, spend some time getting to the real number of how much your business expenses cost each month. When you have that number, add it all together- that is your revenue target each month in order to make all of the numbers line up. Now, you have your goal and just need to know how you are lining up to that goal.

Often, especially early in the entrepreneurial journey, these numbers won't happen right away. That means you need to decide what is getting adjusted- your pay, reinvestment or your expenses. Or all of them.

Now that you know the math of paying yourself, let's talk about the how. It is simple and that is often what trips entrepreneurs up when it comes to paying themselves. It seems TOO SIMPLE.

The first thing to figure out is how often you want to pay yourself. It's important to pay yourself regularly, just like you would get a paycheck if you worked for someone else, you should get a paycheck working for yourself. Set up a regular payment schedule, such as weekly or monthly, and stick to it. This will help you create a habit around paying yourself and it creates consistency in your business budget also. This habit will serve you well as your business grows and you need to hire other people.

So we have figured out how much and how often but HOW do you pay yourself? One mistake I often see is an entrepreneur just using their business account to pay for personal expenses. DON'T!!!! All you really need to do is transfer money from your business bank account to your personal bank account and then note in your bookkeeping records that it was for your personal income. This creates an easy to follow paper trail for records when they are needed.

After you start paying yourself, set a check-in for a few months down the road to revisit and see if the amount you are paying yourself is still the right amount. You might surprise yourself and be able to give yourself a raise.

Paying yourself as an entrepreneur can be challenging, but it's essential to support your personal financial needs and ensure you don't end up resenting the time you invest into your business. By working the numbers backwards to determine a salary, paying yourself regularly and transferring the money into your personal bank account, and reinvesting in your business you can ensure the long-term success of your business. If you're not confident in your numbers or still unsure about paying yourself, I encourage you to schedule a call to discuss working with a finance coach who specializes in entrepreneurial finance. Sometimes, that outside view a coach brings to the table, can help you see things in a way you never would on your own.