Whether you’re a woman entrepreneur, a solopreneur or you run your own private business, one of the hardest decisions is to know how to pay yourself in a sustainable way. For both your sake and the business’ sake!
There are so many balls to juggle and decisions to make as women in business. From expenses going out and sales coming in, working out a sustainable, well-thought out and pre-planned wage is important. It can be stressful during periods where you have not left enough in the business account for all the next month’s outgoings. And it creates anxiety and overwhelms that just means you’re not working at your best.
Women in business also tell me that it can be exhilarating when you pay yourself really well for all your hard work. There is nothing better than feeling well-remunerated for hours and dedication you have spent servicing others in a meaningful way. You’re working your butt off, right?
Pretty early on in my work, it became apparent to me that women entrepreneurs spent a lot of time and energy deciding on the wage to pay themselves. They constantly worry, am I paying myself too much? Or am I paying myself not enough?
So here is my 3 straight-forward steps to pay yourself JUST RIGHT.
#1 Know your average sales revenue per month
Add up your sales for the last three months and divide by three. Why?
Because we need to know in an average month how much money your business currently brings in. This figure is the first step to start working out a sustainable wage to pay yourself.
#2 Know your business expenses and personal expenses per month
Know without a shadow of a doubt what your business costs per month!
(and make sure you have accounted for tax)
I can’t express how important and game-changing knowing this one figure is.
This enables you to know the proportion of what your business earns that will be paid out (sometimes almost straight away) to keep your business running.
Next, work out the same for your personal life. How much do you need monthly to pay your personal bills. This is the bare minimum wage for yourself. The point at which you can make ends meet.
What you’ve effectively done here is worked out your businesses financial goal posts. What you are aiming for!
#3 Find the sweet spot
What is the sweet spot? It’s the balance between where you can pay all your biz costs and yourself a wage at the sales revenue you’re at.
Some women entrepreneurs will find their business currently can’t pay themselves the full amount to cover all personal expenses, and when you’re starting out that’s ok. Work on increasing sales, decreasing expenses or increasing your profit margin. These are ways to keep more money in your business bank account to (eventually) pay yourself more.
If your business can fulfill the minimum wage to cover your personal expenses and monthly business expenses, then it’s time to get strategic about increasing your wage.
Ask yourself these questions.
>> What’s on the horizon for the next 6 months for your business?
>> Do you have the plan to invest in rebranding, launching a new product or any large annual bills coming up?
>> What money will I need for my business in the foreseeable future?
Essentially this forward planning will ensure you have put aside this cash ready for these items before increasing your wage. Otherwise, I find some business owners end up having to put personal funds back in the business when these projects come about.
With these funds placed aside, start incrementally increasing your wage. If you pay yourself weekly or fortnightly find an amount you feel comfortable with and start there. Pay yourself this higher wage for the next 2-3 payments.
When you recognize that all the business bills are being met, this figure will become the new ‘normal’ for you. And that is your signal to incrementally increase your wage again.
You can continue this process of review your average monthly sales, review your average monthly expenses and adjust your wage till you reach the sustainable wage for you!
Are you ready to start paying yourself sustainable today?