It’s a sad fact that 45% of small businesses don’t make it to year five. Why? One of the biggest reasons is that they simply don’t make enough money to properly pay themselves, let alone any employees. The key to running a successful small business is to pay yourself first. But here’s the thing: you have to make enough money to do that and you have to have the proper discipline and mindset to follow through with it.
Everyone seems to understand the concept of paying yourself first in their personal lives, but then don’t apply that to their business. I’ve seen entrepreneurs be DECADES into running their business and have never properly paid themselves. All that does is create an unsustainable business model that will likely burn you out and you’ll end up failing along with the other 45% of businesses. So how do you pay yourself first and avoid this entrepreneurial pitfall? You have to build your business correctly from the start. Here’s how.
Build Profit Into Your Business
Do you want to squeeze more profits out of your business? Then you need to have that built-in from the get-go. Profit is a product of your revenue minus your expenses. If you aren’t turning a profit, the answer is usually not just making more sales. Instead, it’s taking a look at what you’re spending money on and determining if there are ways to cut those costs. It’s also figuring out which products or services produce the most revenue with the least amount of cost and increasing those while reducing or eliminating those that eat up your resources.
Charge the Right Amount for Your Services
If you aren’t charging enough for your services, it’s impossible to build your profits to the point where you can pay yourself first. Most of the biggest mistakes commonly made by entrepreneurs revolve around not planning properly. And too many of these entrepreneurs think they can solve those problems simply by increasing revenue. As I mentioned above, increasing sales by itself is not the answer. Have you looked deeply into your products and services and determined their cost? Are you charging enough to cover those costs and make enough to pay yourself? You might be surprised by what you find when you ask these questions. If a service costs as much or more than it brings in, you have two choices: eliminate that service or increase the cost of that service.
Build Out Your Business GPS
If you don’t have a plan for your business, you’re running it more like a hobby. One of the signs of not running your business like a business is that your business is running you instead of the other way around. If you don’t build out your business GPS so you know where you are, where you’re currently going, and where you need to go, you’ll constantly be at the mercy of the economy, your customers, etc. etc. If you’re not sure where to start when it comes to creating your GPS, consider working with a business coach or, better yet, take our Money Mastery course that was built specifically for entrepreneurs.
Knowing your value is vital for all entrepreneurs. When you know how valuable you are, you won’t have a problem taking the steps necessary to build a business that pays you first. Have questions or comments? Leave them below so we can continue the conversation!