Time for a Raise: Why Paying Yourself More Will Grow Your Business Faster

(By Mike Michalowicz)

If you’re writing yourself a paycheck, then your business has to bring in money. It’s that simple. Without the pressure of expenses to meet, it’s easy to treat your business more like a hobby, rather than the entity that lets you afford to live. As your business grows, you should also pay yourself more. Your healthy business should pay you dividends that reflect your hard work, vision and dedication.

When I’m consulting with clients who are looking to grow their businesses, I always ask the question, “Who’s your most valuable employee?” My clients get this answer wrong every time. They wax poetic about their rock-star salesperson or their dedicated assistant, and never once mention themselves. It’s not only short-sighted, but that thinking can do damage to your business in the long term. You are your most important and most valuable employee, and you need to treat yourself just as you would any other staff member who’s integral to the success of the company.

Entrepreneurs wear two hats (okay, it’s often more than that). You’re an employee and a shareholder. You produce the revenue, and you should benefit from that revenue. Just as you’d nurture a star employee, and just as you’d expect a return on your investment as a shareholder in another business, you deserve—in fact, you’re obligated—to pay yourself for both of these roles.

Need more convincing on why you deserve a raise today?

1. To avoid being a crutch. Make a list of your responsibilities and duties. What would you pay someone to do all that work? If you’re not fairly compensating yourself, then you’re not running your business responsibly. If you’re subsidizing your business by underpaying yourself, then your company is doing little more than limping along. Paying yourself a fair wage forces you to run your business properly and profitably, and is inevitably better for your business in the long run. Too many company founders suffer under the delusion that they must sacrifice income in order to start a business. In fact, the opposite is true: If you start a business and require it to be profitable from day one, you have a much better long-term outlook.

2. To make yourself replaceable. Growth comes when you can hire an employee for part of your current workload and free yourself up for bigger and better things. If you’re already paying yourself for the duties you’re hiring for, then it’s an easy transition. If you’ve been volunteering your efforts, then you have to scrounge up the money for payroll—not an ideal scenario. It’s not uncommon to see entrepreneurs running around like one-armed paper hangers, unable to see the big picture for all of their little daily duties. You must be able to afford employees as you grow so you can keep the big picture in sharp focus.

3. To keep from resenting your business. I see it over and over: Entrepreneurs who sacrifice their incomes to help their business limp along. They end up caught in the perpetual cycle of the desire to grow and the frustration of seeing their unsustainable business be unable to support that growth they so desperately want. If you’re getting paid fairly, you’re rewarding yourself for growth. It’s responsible and sustainable, and it breeds success.

4. To become more efficient. If you’re writing yourself a paycheck, then your business has to bring in money. It’s that simple. Without the pressure of expenses to meet, it’s easy to treat your business more like a hobby, rather than the entity that lets you afford to live. As your business grows, you should also pay yourself more. Your healthy business should pay you dividends that reflect your hard work, vision and dedication.

You’ll notice nowhere on this list does it say, “To buy a fancy sports car and show the world I’m a success.” Don’t get me wrong—I get the appeal of that, but I’m telling you that you must pay yourself fairly because it’s better for your business. Requiring your business to be sustainable is smart. You’ll force yourself to find ways to economize and boost your efficiency. You’ll find that you attract better employees if you realize the value of the work you’re asking them to do. And you’ll realize that growth will perpetuate growth. Creating good habits will yield benefits for the entire life of your company.

(Source: Openforum)

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