This is the question that seems to constantly slide into my DMs: As a independent contractor/ small business owner/[fill-in-the-blank], should I pay myself?
Yes, you should find a way to pay yourself that fits with your business. There are many different ways that you can go about this, but today, I’ll focus on a couple of tips to get you started. When we start talking about this topic, there are really two parts to consider:
- How do I pay myself?
- How much do I pay myself?
Read on for my thoughts or watch it in video form right here:
How should I pay myself?
“…and should I actually write myself a check?!”
It’s a funny feeling when you’re both the business owner and the person you’re “paying,” so I understand why I get these questions all the time. The short answer is: No, you don’t have to write yourself a check. But if your business affords you the ability to pay yourself, I would love for you to find a system that gets you on a consistent schedule of doing so. So, first things first:
Check Out Your Numbers
Dive into your profit and loss statement. The goal is to really see what your business can afford in terms of compensating you. Here are my three favorite calculations that every solo provider should know by heart and some tips on better understanding your profit margins. If you use Schedulicity Pay as part of your booking process, you can also get reports on revenue, including monthly recurring revenue, to help give you an idea of what to expect month-over-month.
Once you see the trends in your business and you can see how much you can afford to pay yourself — automate. You already know that sending automated birthday messages, thank-yous, and follow-ups saves time (here’s how to do that with Schedulicity) and that automated billing saves headaches. Treat yourself to the same system. Set up an automatic withdrawal either every week, bi-monthly, or every month depending on what you feel comfortable with. You want to make it rain consistently.
Go With Your Gut
It’s your business. Pay yourself what you’re comfortable with and pay yourself as often as it works for you. This will look different for everyone and should be based on your business data (step 1) and no one else’s!
How much should I pay myself?
The big question, right? So: I recommend paying yourself based on a percentage of your revenue.
Option 1: Percentage-Based
It should be something that makes you feel comfortable and that your business can afford. It could be five percent or ten percent or maybe even fifteen — again, running those numbers first is going to give you a clear picture of how much you pay yourself.
Option 2: Flat “Rate”
Alternatively, you could pay yourself a flat rate — $200 a week, $500 a week — for whatever your business allows. This is especially good if you have a consistently booked schedule and relatively the same revenue month-over-month.
Conclusion: Make Paying Yourself Easy on Yourself
Once you determine what the amount will be, I’ll reiterate: set up automated transfers from your business account to your personal account. The goal is to “set it and forget it.” That way you’re not wondering about if you should pay yourself but how and when. Because you do deserve to get paid.