Business owners wear so many different hats daily it is almost hard to keep up. At the start-up phase, an entrepreneur may serve as the CEO and president, secretary, treasurer, IT director and marketing director all at the same time, and most times for little to no pay as taking on so many different roles may be out of necessity due to scarce resources. Though the entrepreneurial spirit to succeed in your business tends to take over and totally encompass your daily life, it is important to recognize everything you contribute as both a shareholder in the company and as an employee who provides benefits and resources. This is most important for self-valuation, and ensuring that you are paying yourself enough.
A recent Forbes.com article entitled “Time for A Raise: Why Paying Yourself Will Grow Your Business Faster” shares the same sentiment and points out four main reasons a business owner should not only pay themselves a salary, but also should consider giving themselves a raise, which include:
1. To avoid being a crutch
Make a list of your responsibilities and duties. What would you pay someone to do all that work? If you’re not fairly compensating yourself, then you’re not running your business responsibly. If you’re subsidizing your business by underpaying yourself, then your company is doing little more than limping along. Paying yourself a fair wage forces you to run your business properly and profitably, and is inevitably better for your business in the long run. Too many company founders suffer under the delusion that they must sacrifice income in order to start a business. In fact, the opposite is true: If you start a business and require it to be profitable from day one, you have a much better long-term outlook.
2. To make yourself replaceable
Growth comes when you can hire an employee for part of your current workload and free yourself up for bigger and better things. If you’re already paying yourself for the duties you’re hiring for, then it’s an easy transition. If you’ve been volunteering your efforts, then you have to scrounge up the money for payroll—not an ideal scenario. It’s not uncommon to see entrepreneurs running around like one-armed paper hangers, unable to see the big picture for all of their little daily duties. You must be able to afford employees as you grow so you can keep the big picture in sharp focus.
3. To keep from resenting your business
I see it over and over: Entrepreneurs who sacrifice their incomes to help their business limp along. They end up caught in the perpetual cycle of the desire to grow and the frustration of seeing their unsustainable business be unable to support that growth they so desperately want. If you’re getting paid fairly, you’re rewarding yourself for growth. It’s responsible and sustainable, and it breeds success.
4. To become more efficient
If you’re writing yourself a paycheck, then your business has to bring in money. It’s that simple. Without the pressure of expenses to meet, it’s easy to treat your business more like a hobby, rather than the entity that lets you afford to live. As your business grows, you should also pay yourself more. Your healthy business should pay you dividends that reflect your hard work, vision and dedication.
As many entrepreneurs are just trying to maintain the ability to sustain their business and pay their personal bills as well, I understand the difficulty in embracing the notion that you may, in fact, consider paying yourself more. Despite the numerous reasons that may deter you from doing so, attempt to justify and fully implement the many reasons why you should!
Rashida Maples, Esq. is Founder and Managing Partner of J. Maples & Associates (www.jmaplesandassociates.com . She has practiced Entertainment, Real Estate and Small Business Law for 9 years, handling both transactional and litigation matters. Her clients include R&B Artists Bilal and Olivia, NFL Superstar Ray Lewis, Fashion Powerhouse Harlem’s Fashion Row and Hirschfeld Properties, LLC.
Check Out This Gallery Of Email Mistakes You Shouldn’t Make At Work: