When entrepreneurs discuss business ventures with colleagues, the question that they dread the most is 'How much do you earn?' Because unlike an employed careerist, an entrepreneur doesn't really have a consistent figure that he/she earns every month. Plus, an entrepreneur has to strike a balance between business costs and personal salary. It actually sounds like a rosy affair to 'be your own boss' until you realize that as an entrepreneur, your salary tends to differ from month to month due to yearly business cycles. The plot thickens on bad business months when you have to make a sacrifice on your salary to ensure the financial stability of your enterprise. Unfortunately, some entrepreneurs make the mistake of sacrificing too much on their part to the point where they can't sort out their personal monthly expenses. With this in mind, it's clear that a threshold has to be established when it comes to paying yourself enough especially in bad times. And so begs the question, how do you ensure that you are paying yourself enough?
#1 Start with the basics
Gone are the days when basics were considered to be food, shelter and clothing. The 21st century has with time ushered in a new generation of sophisticated lifestyles and tastes that go beyond mere survival. The scope of basics has extended far and wide to include monthly demands such as electricity, internet connectivity, medical insurance, fuel and car maintenance, house mortgage, basic personal utilities and so forth. With this in mind, it wouldn't be wise to presume the total monthly cost of your basics. It's in fact necessary to put the facts on paper and assess the anticipated monthly consumption and thus come up with a rough figure of the bare minimum you ought to earn as per your basics.
#2 Determine your rate of savings
We usually save for four main reasons. First and foremost as a precautionary measure, savings are key in bracing yourself for unseen financial crises or emergencies. In addition, an entrepreneur is least likely to miss on seasonal business opportunities that come during festivities or times of an abrupt economic boom. Then there are our personal ambitions like owning that dream house, driving that dream car, taking a trip to Paris and so forth. And last but not least, we tend to encounter people in dire situations that need help from us. There are also charity events that crop up once in a while and thus, an opportunity to give back to the community presents itself. These four key factors should help us estimate our rate of investment and thus establish a threshold when it comes to estimating how much we ought to pay ourselves.
#3 Be realistic with your wants and ambitions
The assumption that if I keep doing what I'm doing, 'somehow' my dreams will automatically come true will only lead to an anticipated disappointment. As the saying goes, never trust a dreamer lest he/she breaks your heart. Embracing reality is key particularly for entrepreneurs because unrealistic ambitions might tempt one to financially siphon their fragile businesses leading to an imminent collapse. While focusing on a salary threshold, it's also important to do your math and establish a salary ceiling when determining if you're paying yourself enough.
#4 Keep tabs on your lifestyle
Lifestyle is a very controversial subject when it comes to determining affordable and sustainable standards of living. Many fall victim to 'luxurious' unsustainable wants and sensational ambitions. Spending more than you earn to sustain a luxurious lifestyle will only lead to outstanding debts. While some would argue that they're not earning enough, most are simply victims of an unsustainable lifestyle. It's therefore important to not only establish a lifestyle threshold, but also establish a lifestyle ceiling as well when it comes to ensuring that you're paying yourself enough.
#5 Do a Monthly Audit of your Business
Many are of the notion that hefty fees are the only way to carry out a thorough business audit. However, this doesn't necessarily have to be the case because many entrepreneurial start-ups are founded upon simple business models. That being case, simplicity begets simplicity. Thus, it's up to you to develop a thorough yet convenient audit process that's based on relevance and effectiveness. Moreover, you can delegate the audit task to your business employees to do a daily counter-check of revenues and expenses every day. A CPA (Certified Public Accountant) credential on your part or your worker's part would also be an added advantage. All in all, with a consistent track record of audits on your business, the chances of embezzlement and underpayment on your part are largely reduced.
#6 'Do unto others what you want them to do unto you'
Sometimes doing everything by the book might not give you the satisfactory salary that you want. This is where motivation comes in. It might be that misplaced financial priorities in your business are the main reason behind a demotivated and under-performing workforce. Maybe it's about time you tried out a different approach when it comes to leadership. First and foremost, an underpaid and under-appreciated workforce will not deliver outstanding results. In addition, being a rude and domineering boss will not help maintain business growth in the long-run. Ultimately, employee attitude can solely determine business success or business failure.
Entrepreneurship is definitely not for the undisciplined and faint hearted. Even as we ensure that we're paying ourselves enough, we shouldn't forget occasions where entrepreneurs earned nothing but still propelled their businesses to success. Their secret? Selfless Passion. Ultimately, your pay shouldn't be the sole and overwhelming determinant of your business success. As Business Magnate Donald Trump once said "Without passion, you don't have energy. Without energy, you have nothing."