As the owner of your business, are you its lowest-paid employee?

I hope not.

But that’s the unfortunate reality for many.

Even for a “successful” business owner like Tom.

His small service business was widely known.

There was no shortage of jobs, his company vehicles were seen everywhere, customers raved about his services, and his reputation was unmatched in the community.

So how could there not be enough money at the end of the month to pay him a decent salary?

It’s a common issue I see with my clients. The business is doing okay – well, even – but the owner isn’t getting paid anything more than crumbs.

Let’s change that.

Since owners are typically paid out of the cash flow or profits of the business (depending on its legal structure), planning is key.

Plan your business around paying yourself.

Let’s be honest: nobody likes the crumbs at the bottom of the potato chip bag. And nobody likes getting paid in crumbs either!

So what profitability and sales level do you need to pay yourself more than just a living wage, and more than crumbs?

You may be wondering, “Okay, sure. But how do I even move in the direction to start paying myself a more-than-crumbs salary?”

It’s a solvable problem with a plan and a budget.

There are six things you can do to increase the profitability of your business so you can stop being the lowest-paid employee.

Some of these suggestions may make you uncomfortable – but that’s where growth happens.

1. Raise prices. This depends on where you are located price-wise in the marketplace and what your competition is charging. But it is certainly a lever you can utilize.

2. Cut costs. Here are several questions to help you evaluate them.

3. Stop running personal expenses through the business if you can’t afford it. Personal expenses that you run through the business should be considered pay! But if you don’t have enough cash to be able to do this, you need to stop.
    
   Personal expenses could include the following:
   – Vacations that aren’t really business trips
   – That new convertible as your business car instead of the sedan that does the job perfectly well
   – Country club or social club membership

    
   Sometimes our egos get caught up in our business; before we know it, it’s driving the decisions.
    
   I encourage you to look at how to do things a little more frugally. In the end, it’s your money. Would you rather have it in your pocket or in shiny stuff that you could do without?
    
   Eliminating these expenditures = more cash in your pocket as pay.

4. Look at what you have left to reinvest in the business in order to grow. What is your business generating to reinvest in business? For example, do you need a new vehicle but can’t make the numbers work? Bankers want to see that your business has cash available to make those payments, instead of running zero in the checking account month after month.
    
   That’s why it’s important to leave some cash in the business for working capital so the business can deal with fluctuations in cash flows. For example, in a slow period you need to make sure you have cash reserves on hand.
    
   It’s just like how individuals should have three to six months of savings on hand to weather any unexpected storms or changes in their employment situation.

5. Manage employee overtime. You have to make payroll. That’s non-negotiable, both by law and by the unwritten rules of decency in business.
    
   That being said, you can manage the work they’re doing in such a way that you can afford to pay them. Make sure their overtime is pre-approved and not taken at employee discretion.

6. Examine the profitability of your work. Do you know if a job is profitable or not? Many business owners I speak to don’t. They’re so busy moving on to the next job that they don’t have the time or perhaps the skill set to go back, gather costs and see if that job was actually profitable.
    
   And I’m not talking about just 2% profitability. Is it profitable enough to sustain the company’s overhead and the owner’s salary?
    
   If not, it’s critical to understand why and what you can do to fix it. You may want to create a budget as a measuring stick to guide you in determining how profitable jobs need to be in order for you to achieve a certain bottom line and cash flow.
    
   (If you’d like a simple, free tool to calculate profitability, click here.

Are you ready to stop being your lowest-paid employee?

Book a call with me today.

Let’s work together to strategize and execute a plan to get your business in a place where you can be paid what you’re worth.

(I’ll even make the tough decisions for you, because that’s just the kind of sport I am!)

Talk with you soon.