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Go ahead and pay yourself
Just make sure you can afford it first
By Arlene Soto
Sunday, November 22, 2009 | No comments posted.
Question: I’ve been in business two years but haven’t taken a paycheck yet. How do I get paid by my business?
Answer: Many business owners have the same dilemma of not getting paid a living wage by their business. A good place to start is to analyze the financial statements and determine where money is going.
• Is the business profitable? If not, look at increasing prices, decreasing expenses or increasing the number of profitable sales made by advertising so customers find you. Since you have only been in business two years, it’s possible potential customers are not aware of your business. Are your prices calculated to cover all your costs, including your wages, plus a profit margin for growing the business? You may need to look at a combination of the alternatives mentioned previously.
• Do you have employees? If so, it’s possible you need to cut back there and do even more of the work yourself. The wages you are paying employees are potentially wages you could earn. Look at the productivity of each person, including yourself, in the company. Each employee should be generating revenues for the company in excess of what that employee costs the company.
If the business is showing a profit, the next place to look is cash flow and where money is being spent.
• Are you paying down debt at a higher rate than necessary or is your debt too high?
• Are you increasing inventory?
• Do you have accounts receivable that are growing or getting old?
All these use cash. Any place the business uses cash is a place you could potentially find additional funds for your own wages. Many small business owners take less of a salary in the first year or two to build the business and fund the future growth of the company. You may need to alter the choices you are making so the business pays you a little more now.
An accountant or an advisor with the Southwestern Oregon Community College Business Development Center can assist you with the analysis of your company’s financial statements. Sometimes it’s helpful to get another opinion to help you make tough business decisions.
(Arlene M. Soto is the Director of the Southwestern Business Development Center. To ask a question call 756-6445, e-mail asoto@socc.edu, or write 2455 Maple Leaf, North Bend, OR 97459. For more information, visit http://www.bizcenter.org.)
Answer: Many business owners have the same dilemma of not getting paid a living wage by their business. A good place to start is to analyze the financial statements and determine where money is going.
• Is the business profitable? If not, look at increasing prices, decreasing expenses or increasing the number of profitable sales made by advertising so customers find you. Since you have only been in business two years, it’s possible potential customers are not aware of your business. Are your prices calculated to cover all your costs, including your wages, plus a profit margin for growing the business? You may need to look at a combination of the alternatives mentioned previously.
• Do you have employees? If so, it’s possible you need to cut back there and do even more of the work yourself. The wages you are paying employees are potentially wages you could earn. Look at the productivity of each person, including yourself, in the company. Each employee should be generating revenues for the company in excess of what that employee costs the company.
If the business is showing a profit, the next place to look is cash flow and where money is being spent.
• Are you paying down debt at a higher rate than necessary or is your debt too high?
• Are you increasing inventory?
• Do you have accounts receivable that are growing or getting old?
All these use cash. Any place the business uses cash is a place you could potentially find additional funds for your own wages. Many small business owners take less of a salary in the first year or two to build the business and fund the future growth of the company. You may need to alter the choices you are making so the business pays you a little more now.
An accountant or an advisor with the Southwestern Oregon Community College Business Development Center can assist you with the analysis of your company’s financial statements. Sometimes it’s helpful to get another opinion to help you make tough business decisions.
(Arlene M. Soto is the Director of the Southwestern Business Development Center. To ask a question call 756-6445, e-mail asoto@socc.edu, or write 2455 Maple Leaf, North Bend, OR 97459. For more information, visit http://www.bizcenter.org.)
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