Tips for Managing Small Business Finances Part 1: Pay Yourself
Small Businesses come into being for a myriad of reasons – a passion for bookkeeping is not a common one.
Still, the byproduct of such a business pursuit means they will also be left dealing with things like managing their small business finances, hiring team members and marketing their goods and services, and the list goes on.
To be successful as a business owner, you have to do all of these things reasonably well, including knowing when to hire someone else to help you.
The fact of the matter is we can’t, nor shouldn’t, do it all ourselves, but we need to have the basic skills, education and organization in all of these areas in order for our business to succeed.
When it comes to finances, there are a couple of golden rules. We’ll discuss four of them in our next series of blog posts. Up first, the importance of paying yourself.
Tip #1: Pay Yourself
When you’re on a plane and the flight attendants do their presentation, they always say that – in the event of cabin depressurization – you need to put the oxygen mask on yourself before you put it on your kids.
If you don’t, there’s a good chance you pass out before you put it on your kid and then you’re both in trouble.
Same is true with your SMB and its finances.
It’s tempting to throw everything into it – including your salary.
And there are times when you’ll need to go a little leaner so that you can pay your team.
But take heed.
While yes, reinvesting in your business is good and can certainly help your business grow, it shouldn’t come at the expense of your own personal salary.
You are a critical employee of your business operation and should be paid accordingly. After all, you wouldn’t expect your employees to work for nothing, and you shouldn’t do so either.
We get that growing your business is a priority, and there may be times when cutting costs is essential, but failing to compensate yourself can become a slippery slope. To ensure long-term success for your business, it’s important for your business and personal finances to remain healthy.
