Mindset of Paying Yourself a Living Wage
You are committed to the success of your business. Your business’s health and wellness allow you to live a full life, make your mark on the world, and help support the lives of your clients and team. You spend so much time taking care of the things and people who keep your business running, you forgot to financially support one of the most critical pieces of the puzzle—you!
The reality is that paying yourself a living wage is about MUCH more than dollars and cents. Creating a living wage for yourself (and paying it) reflects how you feel about yourself as an individual and business owner. Becoming aware of your money mindset and how it holds you and your business back is a crucial step towards your financial health, success, and freedom.
But do you know how to determine the right living wage for you? It’s important to examine why you’re waiting to pay yourself the big bucks and how to assess where you are now to create a brighter future.
What is a living wage, anyway?
The first step to finding out how much money you need to make a living is to know what a living wage actually is. We’re not talking Ramen noodle living; we’re talking about normal everyday living. Spend some time thinking about what living really means to you and how much you need to finance it.
Ultimately, your pay is about more than numbers and spreadsheets. Mindset shifts around determining your owner’s pay can bring up feelings of guilt and even unworthiness. Depersonalizing your salary is a great way to sidestep any residual emotional issues around money. Determine what you feel is a fair wage for someone else, and pay yourself at least that much—minimum!
Do you want to work in your business for the rest of your life? If you are like most business owners, the answer is probably no. But if you’re not paying yourself a livable wage to do your job, how will you ever be able to hire someone to replace you in the future?
Check out our blog to learn more about how to determine your Profit First owner’s pay allocation.
Why should you pay yourself?
As a mature business owner, you might be waiting to pay yourself until you can sell your business for the perfect ROI. The truth is many entrepreneurs who have waited for the pot of gold at the end of the rainbow never see their payoff.
Living for what might happen in the future compromises your quality of life in the present. Putting Profit First in your business today helps you gain more financial clarity to help you reach future goals.
Fast forward to when you have your Profit First strategy in place. Your business fully supports your desired lifestyle, but you have “extra” money. Your first instinct might be to leave the surplus (the profit) in the business, but the best option is to pass the extra into your personal rainy day fund.
Transferring half of your business profits to your personal accounts on a quarterly basis and essentially paying yourself creates benefits to the owner. Moving your money out of the business and into your personal account creates a buffer if your business gets sued.
Additionally, the act of transferring your money into a personal account has the potential to make you more money in the future if you do decide to sell. On paper, a large portion of the financial value of your business is determined by the amount you have paid to yourself as the business owner. Typically, sellers can determine the sellable value of their companies by doubling or tripling the amount of income they received as the business owner.
By implementing Profit First and adjusting your money mindset in the short term, you are increasing the value of your business in the long term—and improving your quality of life!
If you’re ready to implement Profit First but aren’t sure where to start, reach out.
We’re happy to help.