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How much should I pay myself?

When I’m consulting to startups or small businesses there is a perennial question: “am I paying myself the right amount?”

That really is a difficult question to answer.

On the one hand, I’d like to say that you should pay yourself what you would have to pay someone else to do what you do. That’s difficult enough as it is. After all, as business owner you are almost certainly doing things above and beyond a normal Job Description – long hours, things “beneath” a manager’s role, the literal bottle-washer. How much would you pay someone for all that?

On the other hand you did not start your business to earn a salary. What you put into the business will reap you the rewards a salary earner will never get – even though it may take a few years to eventuate. You will have equity, you will have the satisfaction of working for yourself, and perhaps the most powerful of all, you will fulfill your dream – the reason you started in business.

Watch this video for a discussion of what you will have to think about when you try to work out what you should pay yourself.

Let’s be honest. At the beginning, what you are likely to be able to pay yourself is simply what’s left in the bank at the end of the day! That can be difficult for business owners who are single income families with mortgages especially in the early days when cash available in the business is in short supply.

I’ve written before about how business owners need to realise they may have to make sacrifices, and this may be one of them.

However your reward really comes from the future, the building of a sustainable business with a base for growth, steady profitability and a structure that you can mould to your vision. Stick to the vision. Focus on what it takes to make your business successful. Be clear about quality and customer service. Stay determined and constantly on track.

Sure it gets hard from time to time, but work smart and work hard, plan your way forward and you will get there. When you do, the celebration is worth the sacrifice!

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