It is not uncommon for women in business to feel it is a reasonable sacrifice to forego their salary in order to keep more money in their business. However, if your business is not paying you a reasonable, market-based salary your business is under performing.
Many female entrepreneurs believe that it is good business practice to take the Net Profit that the business generates each month as their salary. I believe your business should be able to generate a Net Profit AND pay you a market-based salary. The key to remember is that you are paid a salary for what you do, and your business generates a profit based upon the expenses it incurred minus the revenue it earned. Your salary is an expense.
How does this relate to cash flow? When you don’t pay yourself a market-based salary, your Net Profit number is overstated because it does not include this key operating expense. For example, if you hire someone to do the job you are currently doing would you leave their salary amount out of your budget? No. Because you wouldn’t be able to accurately determine how much revenue you need to earn to cover ALL of the business expenses.
Your financials are useless and your numbers are incorrect without this key expense.
Below are four ways your business can begin paying you a reasonable market-based salary.
1. Lead With The Numbers & Not Your Heart
A reasonable market-based salary is an amount you would pay someone to do the job you are currently doing. In addition, your salary should be based upon the time and effort you put into building your business.
As women, we often lead with our heart but at some point, we have to realize that no matter how much we love our business and enjoy what we are doing; our love will not pay the mortgage and bills.
2. How Much Should The Business Pay You
The first step to determine how much the business should pay you is to itemize everything you do in the business. From open to close, from the 1st to the 31st what do you do on a daily basis as the technician of the business?
After identifying your duties research the market-based salary according to your job performance.
3. What If My Business Is Unable To Pay Me A Market-Based Salary
If your business is unable to afford to pay you as the CEO a market-based salary your business is operating at a loss. If this is the case you need to review your business model and revenue structure.
One key way to repair this problem is to ensure your revenue structure is set-up to allow you to generate income on a daily basis.
Begin by determining your monthly revenue goal by using the following formula:
Market-Based Salary + Operating Expenses + Profit Margin (at least 20%)
Once you have this number divide by 30 or 31 to determine the amount of revenue you need to earn on a daily basis.
4. Increase Your Prices
After determining your daily revenue goal the next step is to review your prices for each service you provide.
For most women in business raising their prices is one of the biggest fears. The most important factor to consider is – do you want a company that is barely surviving or do you want a company that is thriving. Your company will continue to struggle if you are struggling in your personal life. Your personal life will struggle financially if you are not earning enough money in the business to pay yourself a salary that supports a reasonable life style.
Don’t be afraid to lose clients by raising your prices. Think of it this way – do you really want clients that complain about your prices? Take a deep breath, take a step back and re-evaluate your prices based upon your goals and quote your new prices next time.
If you need assistance determining your market-based salary, restructuring your business model to support that salary and ensure that the business generates a profit on top click here to contact Octavia and the Say Yes To Profits team today.
The author of the bestselling book, Say YES To PROFITS, Octavia “The Profit Maximizer” Conner is America’s Leader in Profit Maximizing for Small Businesses. She is equipped with over 14 years of finances, accounting, and business development experience.
Octavia Conner is a high achieving accountant and financial management consultant who specializes in closing financial gaps, reducing tax liabilities, streamlining business operations and locating hidden money leaks in order to significantly increase small business profit margins. She has a keen eye for helping small businesses improve their financial health and remain in the black.
Octavia has been featured in Atlanta Business Chronicle, YES Magazine, Women Creating Wealth Show, 100 Female Entrepreneurs, Smart Hustle Magazine and much more
For more information contact SayYESToProfits.com