Want to know my old strategy for paying myself?
Pay business expenses, save 30% for taxes and then pay myself whatever was left.
What resulted was very inconsistent income in my personal life.
Some months I felt like a baller, others I nervously thought to myself “hmm, can I pay my rent this month?”
And then I read Mike Michalowicz’s Profit First book this summer. (That’s an affiliate link!)
I read the book at it all clicked.
We’re not meant to be slave laborers to our business. We’re not meant to put in the 50-hour weeks and then take home the scraps. We’re not meant to pay our contractors, assistants and expenses and then take home whatever is left.
We took the risk of starting a business.
We are the ones working insane hours.
We are the ones handling all the odd jobs we’re not nearly educated for or knowledgable on. But we do it anyways because we have to.
Calculating how I was paying myself before was totally wrong.
With risk (starting your business) should come reward ().
The way I was doing things, however, meant with risk came bits of unreliable income here and there causing my personal finances to always be a little confusing and stressful.
But Mike convinced me. Our businesses should not be profiting others first. It should be profiting us first.
And you know what that means? My payment model, the old way I was calculating how much I made each month, was completely backwards.
Business income – expenses – taxes = my money
Are you doing the same thing? Taking all the risk? Working all the hours? Doing all the jobs? And then taking home the leftovers?
No more friend! Here’s a new model to try out.
Business income – my money – taxes – expenses
Now I know you’re over there scratching your head wondering how exactly that plays out in practical terms.
It’s all about percentages and averages friend!
Step 1: Determine the percentages of business income that gets allotted to each area (salary, expenses, taxes.) Then we pay out those percentages to those areas of our business monthly.
(Or bi-weekly, you get to choose. I do monthly as it feels easier to me).
How exactly do you know what to pay yourself then?
Step 2: Look back at your business income over time, average out what you’ve been making and multiply by the percentage you’ve determined as your salary.
Since I’ve implemented this system, I’ve been paying myself a consistent salary month after month.
And coming up soon, I’ve got a solid strategy for determining when and how to give myself a raise!
Why am I all excited about business finances at the moment? I’m smack dab in the middle of building my Square Secrets Business course at the moment, a course teaching other aspiring Squarespace Website Designers how to build a successful (and profitable!) business.
And want to know one of the things I’m most excited to share with students? The exact, behind-the-scenes of how I’m organizing my business finances and paying myself a reliable salary every month, even when my business income is all over the place.
If you’re an aspiring designer or maybe have already been taking on a few clients here and there but you feel your business foundation and systems are maybe a little shaky – it’s time to hop on the course VIP waitlist!
By joining the VIP waitlist, you’ll be the first to hear when the course is released, and you’ll get an opportunity for a little savings off the price of the course as well!
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