Have you ever struggled with what to pay yourself?
This has been a constant battle for me since I started my business. I had heard all of the stories that most businesses weren't profitable in their first few months or even for a couple of years. So I didn't mind not taking a salary because I felt the tax benefits were LIKE getting paid and I invested every dollar I made into building my company.
HOWEVER, I recently began taking a harder look at what it would take for me to quit teaching and work for myself full-time. There's a lot of early mornings, late nights, and low energy days when it comes to my family and I want to fix that ASAP.
Here's a couple of problems with this approach that I wished I had fixed sooner:
1. My pay should have been included in my expenses. Period.
2. My pricing should include my pay. Period.
There are a couple of books that address this, and one that I recommend is Profit First. But because I sell a variety of items at a variety of price points, it was difficult for me to determine my profit margins for every single item - and I never took the time to set up and stick to using all of the accounts that he recommends.
Until I met Jamie Trull, a Financial Literacy Coach for women. In her course, she walked me through pricing models that revealed where my business was bleeding, and why I couldn't afford to pay myself what I wanted.
Here's the ugly truth: at my previous pricing for wooden letters and numbers, I could sell 100 units in the next 100 days or I could sell ZERO units in the next 100 days and my bank account would stay the same.
OUCH. Do you get what I'm saying? I could grind and burn myself out and sell like crazy or I could stop immediately, making zero sales, and still come out the same financially.
As much as that burned my ego, I'm so glad that I had that revelation. Working for the sake of work just doesn't make sense. We have to figure out how to work and make money and not just try to will ourselves to financial freedom.
So I raised my prices IMMEDIATELY. Even though I was afraid people wouldn't buy, I raised my prices. Even though I thought my ego couldn't take the reduced-sales hit, I raised my prices.
And guess what: I'm still getting sales. I've been able to increase what I pay myself. And in spite of COVID-19, my business is growing. More importantly, my PROFITS are growing.
Now, every time I hear the cash register "cha-ching" from my Etsy, Amazon or e-commerce stores I no longer cringe. I smile. I do a little money dance.
So let's talk about money, y'all. Are you charging enough to pay yourself what you want and need? Are you seeing the balance in your account move up every month?
The sooner you address this the sooner you will begin building a healthy and profitable business. Want to continue this convo? Shoot me an email at firstname.lastname@example.org and let's talk about it!