Tuesday, 7 June 2011

Pay Yourself First!

If you are in business or are self-employed, do not make the common mistake that most business owners do in not paying yourself first.  I attended a recent Director’s Board Meeting for a large manufacturing client.  To help my clients grow their sales, cash flow and profit, I often attend and am included as part of the monthly and quarterly board meetings.  I was surprised at the view of the Directors. They were happy to earn what remains after all the expenses had been paid for the year.  They draw unequal amounts during the year as Director’s Drawings, however they had not fixed in their weekly remuneration for all the years of experience and skills that they had.  They paid themselves last!

My message to you is to pay yourself first otherwise you will not get paid at all.  I see it time after time in businesses where the owners pay themselves after all the other expenses have been met.  Even the janitor gets paid before them!  This often leads to them being paid less than most of their staff!   The skills and experience that you have has value and this should be recognized by setting a wage for yourself in your business above the market wage that you could earn if you were simply an employee.  You do not reward yourself accordingly.

If you don’t pay yourself first then there will always be an excuse come the end of the month, and you will cave in and say, “there is not enough money this month to pay me what I should get so I will forgo my wage.”  You will end up earning a lot less than what you could if you simply closed down the business and became an employee for someone else.

Pay yourself first and you will be amazed at how you then manage to come up with the additional cash flow and sales to pay the other operating costs of the business.  Do not forgo or undervalue what you are worth in your business.  You take all the risks and experience all the stress, you need to share in the rewards.

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