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The Entrepreneur’s Paycheck

4/20/2016

 
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As business owners, we may be so busy making sure the bills get paid and the product gets out the door that we may not be quite as proactive about our own compensation.

To pay themselves, many new business owners take what’s left after employees and vendors have been paid, and that ends up being their paycheck. 
An alternate perspective is that entrepreneurs should be paid three times:
 
  • For what they do
  • For the risk they take
  • For the going concern they’ve built
 
If you’re not getting paid three times, here’s how it can work.
 
First: Your Services 
 
Just like the employees and contractors we work with, we should get paid for the actual work we perform in our business. Most of us wear many hats in our business, and we need to recognize the value of the roles we fill.
 
As your business grows, the tasks you initially performed will be delegated to employees. They would never go without a paycheck, and you shouldn’t either.  
 
The amount you pay yourself should be similar to the market rate you would have to pay someone if you hired someone else to do the jobs you are doing. As your company grows, you will be going up the management ladder and your salary should increase accordingly.
 
If you have cash flow problems paying yourself or others, then you might have one of two problems:
 
  • The goods and services you sell may not be priced correctly
  • The number of clients you have may need to increase so that you reach an acceptable volume in your business
 
Second: Your Risk
 
After you’ve paid yourself for the jobs you are doing in your own company, there should be something left over: profit. As a business owner, you have earned that profit; it’s your reward for taking the risks that go with business ownership.
 
If there’s no profit left over, then there could be a number of problems. This is where accounting professionals can help you review the revenues and expenses in your business to identify and rectify issues.    
 
Third: Your Going Concern
 
A third way to get paid is when you sell your business. There are many things you can do throughout the years to boost your business valuation, and the more you can do that, the higher the proceeds will be from your business.
 
Financial Success
 
One of the factors that can increase all three forms of compensation is your financial skill set. Building your financial skills by working with accounting professionals can help you price your goods and services accurately, improve your cash flow, hire employees at the right pay rates, and implement many more financial success factors in your business. 

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    Author

    Successfully meeting the challenges inherent to new and smaller businesses provides me with a special type of satisfaction. 

    Supporting businesses that have the potential to become amazing – from both the perspective of owners and team members as well as their clients – is what I enjoy. 

    I hope to use this blog to provide information specific to businesses that are growing from small beginnings into exceptional companies.

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  • Home
  • Why Us?
    • Reviews
    • Open Positions
  • Client Services
  • Resources
    • Save on QBO Subscriptions!
    • Tax Refund Status
    • Gusto Year End Checklist
    • Videos >
      • Business Taxes >
        • 2019 Business Tax Highlights
        • 7 Ways Small Business Can Save On Tax
        • Taxes for S-Corp Owners
        • The IRS Loves Businesses
      • Personal Taxes >
        • 2019 Tax Highlights
        • Five Yearly Tax Essentials
        • 4 Common Tax Surprises
        • Retirement Can Be Taxing
        • Advance Child Tax Credit Reconciliation - 2022
        • Make the Most of Your Donations
        • Five Great Tax Secrets
        • Renting Your Property Tax Free
        • Ideas to Audit-Proof Your Tax Return
      • The Tax Cuts & Jobs Act >
        • The Tax Cuts & Jobs Act: What You Need to Do Now
        • The Tax Cuts & Jobs Act: Are Itemized Deductions A Thing of the Past?
        • The Tax Cuts & Jobs Act: The New Child Care Tax Credit
      • Tax Topics >
        • Tax Season is Coming!
        • The New World of Deductions: What Everyone Needs to Know
        • Proving Your Deductions
        • How to Fix a Mistake on Your Tax Return
        • How Long Should I Save It?
        • Tax Credit vs Tax Deduction
        • Understanding Effective Tax Rate
        • Understanding Marginal Tax Rate
      • Life Events >
        • Life Events: A New Birth
        • Life Events: Marriage
        • Life Events: Divorce
    • Articles >
      • Accounting & Bookkeeping >
        • How to Get the Most Out of Your Accounting Fees
        • The 10 Biggest Money Leaks in Your Accounting System
      • Business Factors >
        • IRS Rules for Classifying Workers
        • Checklist for a Healthy Cash Flow
        • 12 Ways to Improve Your Business Profits
        • 10 Step Annual Business Check-Up
      • Tax Topics >
        • Tax Guide for Self-Employeds
        • 15 Things Every Tax Payer Should Know
        • Disaster Casualty Losses
        • Travel & Entertainment Deductions
        • Tax Guide - A Deduction Checklist
        • What You Should Know About Tax Audits
    • Newsletters >
      • Newsletters - Monthly Editions >
        • Newsletter - Monthly Edition
      • Newsletters - Quarterly Editions >
        • Newsletter - 2019 Fall/Winter
        • Newsletter - 2019 Spring/Summer
    • How To's >
      • How To - Dext
      • How To - BILL
  • Blog
  • Appointments
    • Client Consultations