Week 7 – Are you forgetting to pay your most important employee, yourself?
9 MIN READ
Like many business owners, you constantly worry about making ends meet. Stressing over making sure you pay your staff, rent, insurance, utilities, marketing expenses, and anything else your practice has incurred.
Before you know it, you are pulling money from anywhere and everywhere to cover those bills. Often, there is little thought about the sacrifices made to pay those bills. You only to find out later that the money spent to cover the operating expenses came out of your pocket, and now there is nothing left to pay you. Or what is left doesn’t cover the lifestyle that you want to live.
Why are you sacrificing your pay?
Many business owners think that they are not an employee of the business just because they own the business. Well, that is simply not true.
As a business owner, you often provide some of the essential services to your business. You deliver high-level services, marketing to bring in new clients, and developing plans for the future.
So, shouldn’t you receive a paycheck if you do all this work? Because if someone else were performing these tasks, they would be getting paid, right? Why is your compensation reduced anytime there is a shortfall in covering expenses?
“You are the most important employee, and you need to treat yourself just as you would any other staff member who is integral to the success of the company.”
You must pay yourself fairly
It’s time to Stop the Cycle.
Every business owner has motivations that drive their desire to own their business. And they probably don’t include living day to day off credit cards, family loans, and always scrambling around to pay bills for your business or your life.
You started a business to serve you, not for you to help the business!
That is why the second account in Profit First is Owner’s Compensation. This account ensures that you, as an owner, are getting paid for the work you do for your business. Because, after all, you are the most critical employee in your business, and it wouldn’t be here without you.
So, how do you figure out what is a fair owner’s compensation for your work?
Start by listing all the activities, tasks, and responsibilities you handle for your business. Nothing is too big or too small to be listed.
- Marketing to generate new business
- Servicing existing clients
- Creating strategic plans to move the practice to the next level
- Updating accounting records & reconciling checking accounts
Next, determine how much time you spend performing each task area.
- Marketing to generate new business – 15%
- Servicing existing clients – 70%
- Creating strategic plans to move the business
to the next level –10%
- Updating accounting records & reconciling
checking accounts – 5%
Now determine a fair compensation plan if you hire someone to perform each of those activities for your business. Then multiply that by the percentage of the time you allocate to that function. Then you add everything up, which is your target for your owner’s compensation.
Start small to reach your target
If you haven’t taken a steady paycheck from your business in the past, then chances are you will not wake up tomorrow and start getting paid what you calculated in the above step. It will take some time to build up to that compensation amount. However, you now have a target amount you are working to achieve.
Creating a target amount is critical because it helps you better evaluate your business and spending habits. It will keep you honest and stop stealing from yourself to cover more operating expenses.
So what can you do now to start working towards your owner’s compensation target?
Evaluate your current spending to ensure that all your expenses provide value to your business. You need to remove any costs that aren’t adding value so that you can replace them with options that deliver the value you expect for your business.
Another option is to work on streamlining your process. Ask yourself what tasks you regularly perform to become more efficient, which would free up your time. Can you then use some of that newly released time to perform other tasks? For example, if you manually enter information into your system, is there a way to have that automatically pulled from somewhere else? By eliminating the manual entry, you can now focus on tasks that generate more revenue for your business.
Utilizing a time block scheduling methodology is another excellent option. This scheduling practice allows your brain to focus on a specific task for a particular period of time, allowing you to complete the job faster and with better results. Documenting what you do and how you do it is also imperative because as the business grows, there will be a time when you are going to need to hire employees to help with the workload.
By taking the time to document your processes and activities while you’re performing them, you are not only setting up a system for your practice to grow and expand, which will make onboarding new hires faster and easier. You are ensuring you understand the roles within your practice to ensure your new hires get the proper training. Plus, as you document it, you might find that there are faster and easier ways to perform the task you didn’t think of before while you focused on trying to get the work done.
Build Business Health
As a small business owner, you take extraordinary risks in opening a business. A significant investment of time, energy, and money are needed to grow and nurture it. It would be best if you got compensated for all the hard work you do daily in the business.
By implementing the Owner’s Compensation account, you are ensuring that you are getting a paycheck for the work that you are performing. You are the most important employee, and your well-being is vital to the business’s success.
Profit First Chiro Roadmap
Is one of your goals to have a financial system that simple, easy, and allows you to make the best decisions to increase your practice's profitability?
With the Profit First Chiro Roadmap, you'll learn the five key numbers that every chiropractor needs to know to make informed decisions about their practice. You'll also get a personalized roadmap that shows you exactly how to achieve profitability.
Stop struggling and start making a profit with the Profit First Chiro Roadmap. Get started today and see the results for yourself!