Hey guys!
Savanna Bell here with My Massage World.
Today, let’s talk about how to pay yourself.
I’ve seen numerous therapists with questions involving the when and how of paying themselves
as the owner.
You may think you need to reach a specific amount of revenue or be in business a certain
amount of time in order to cut yourself a check…not true.
Or you may think that you can just use that business bank account like a piggybank for
your personal expenses…not a good idea at all.
Some therapists start out with this question of paying themselves in mind, and others just
trudge along for years without ever writing themselves a regular paycheck, just taking
money out whenever they can to pay for this or that personally.
In reality, you should be paying yourself as soon as financially possible.
No matter how small your business is or how little revenue you’re bringing in, as soon
as you can afford to write yourself a decent check, do it, and do it consistently.
I’ve talked before about the importance of having a good chunk of money saved when
you start your practice so that you can still pay all your business and personal bills without
much stress or fear of having to shut your doors.
But no matter how much you save, that savings is finite.
You’ll need to pay yourself eventually to be able to have a consistent income to live
off of.
So let’s look at the three big questions of paying yourself….
WHEN SHOULD YOU PAY YOURSELF?
As soon as possible!
Once your reach a point in your business that all your liabilities and financial obligations
are covered (i.e. rent, utilities, marketing, and all general overhead and expenses), what’s
left over can be used partially for your income.
So, write yourself that check!
HOW MUCH SHOULD YOU PAY YOURSELF?
Here’s where some people mess up; there’s no real set amount.
They’ll often just take everything that’s left over after business expenses are covered.
And while that may seem logical, you’ll want to keep some of that money within the
business, because when you write yourself that check, that’s another expense just
like any other that your business incurs for operation.
It’s no different than having to pay an employee you hired, right?
The business is a separate entity and should be retaining an income as well.
But how much exactly?
While I can’t give you an exact number of course, there’s a few different ways to
go about this.
You can pay yourself a portion of profit.
Let’s say you have $2,000 left over at the end of the month after all your business expenses
are covered.
You don’t want to pay yourself that full 2k, as your business needs to maintain some
savings and profit within the business accounts.
Instead, you would take a portion of it.
What percentage is up to you, your needs, and the needs of your business.
If you can get by with splitting that 50/50 so you take $1,000 as take-home pay and the
business keeps $1,000 to build up savings for future investments or expansion, great.
If you need more personally, then so be it; but always be sure you’re leaving something
for the business as well.
You can pay yourself a percentage of revenue
Some business owners prefer to base their pay like commission, where they pay themselves
a percentage of the revenue brought in.
For example, let’s say your monthly revenue was $6,000.
Your expenses stay the same at $3,000 each month so your overall profit is $3,000.
Simple enough?
If you want a 20% commissioned income (based on revenue, not profit), then you’ll get
$1,200.
The rest ($1,800) stays as business profit.
You can pay yourself a flat hourly rate or salary.
While the others may fit best early on as your business is growing and your revenue
varies, or is just not as high as you need it to be, once those numbers stabilize, paying
yourself an hourly rate, or even a flat salary is one of the best ways to go.
The reason for this is that you’re then making a consistent fair market wage instead
of arbitrary amounts that wax and wane with the seasons.
This is also a bit more tedious, as you’ll want to figure out WHAT is a good hourly rate
or salary; but this is also where you’ll take a good hard look at just how much work
you’re putting into your business.
How many hours are you spending each week on business matters?
Try tracking that time in detail for a month and you might be surprised just how much time
you’re really putting in.
What is a fair hourly rate for what you do?
Think of it like this….you’re not just a massage therapist getting paid for that
hands-on time, but as a business owner you’re also a janitor, social media manager, graphic
designer, receptionist, bookkeeper, and so much more.
What is a fair hourly rate for someone who can do all of that?
HOW DO I PAY MYSELF?
Writing yourself a check or using direct deposit is the way to go.
This needs to be tracked as an expense like any other, and categorized as “owner’s
income” or something to that effect.
It’s crucial that this is kept up in your bookkeeping records like any other expense.
It’s also important that you’re consistent with those payments.
Whether you pay yourself weekly, bi-weekly, or monthly, once you start, keep it up.
A consistent amount on a regular basis gives legitimacy to your books from a financial
and tax perspective, but it also of course gives you some regularity in your own personal
financial life.
I know how easy it is to keep pouring everything you have into your business, but just like
we say from a self-care perspective, you can’t pour from an empty cup.
Or back to the financial idiom, you can’t get blood from a stone.
You have to pay yourself as soon as possible so you and your business can thrive.
I just wrapped up a Bookkeeping 101 class for our members today, and if you’re interested
in learning more about how to keep up your books, and what’s really important for your
type of practice, be sure to join our membership program and get access to this class, along
with several others, including Website Design & Development, Creating an Experience, Brand
Development, and more.
Plus stock photos, promotional graphics and videos, and more marketing content to grow
your business fast.
For more tips on getting and keeping clients, be sure to join the My Massage World Facebook
group and check us out at MyMassageWorld.com, like us on Facebook, subscribe to us on YouTube,
and stay tuned for more videos.
There’s a new one every week!