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  • Writer's pictureMarcus Williamson

Pay Yourself (more)

I do not believe anyone has ever started a business and said to themselves "wow, I hope I don't make a dime off of this". But for an overwhelming number of small businesses I see, owners barely pay themselves a dime. In a startup business, this is more understandable, but when a business is 3+ years old and cannot support paying the owner (assuming he is actively working in the business) a market rate wage, something is wrong and issues need to be addressed.

Now, you may be thinking to yourself "what does it matter what I am paid? I get the earnings of the business" and you are correct to an extent. I would contend that if you are doing a job that is vital to the business, you MUST pay yourself what the market would dictate you pay a similar CEO/GM/etc if you had to hire one. By not paying yourself a reasonable salary, you are artificially inflating your business earnings and fooling yourself on the profitability of your business. If you have a 10% net margin but are not taking a salary, do you really have a 10% margin? The answer is more than likely no. Fix your labor, reduce your overhead, grow your revenue - do any other number of things to increase your bottom line. But do not increase the bottom line at the expense of your own pocketbook.

When you pay yourself a market-based wage AND achieve a profit margin (shoot for 10%+), THEN you can begin to see the accretive value of owning your own business - the return on your investment. That is why we are all working hard and taking risks.

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