Question: Should a startup business owner pay themselves a commercial rate salary from day one?
– Robin Dickinson, Business Facilitator & Mentor, RobinDickinson.com, Sydney, Australia
Shannon’s Answer: Robin, thank you for your question. It’s probably one that most entrepreneurs ask themselves when they are getting started — I know when I got started, it was one of mine.
When setting a budget for your new business, one of the significant factors to take into account is your own salary. Whether you are self-funding, or seeking outside financial support, you need to know what you must have to live on during the startup process. And most startup ventures can take anywhere from 6-18 months before becoming profitable. So if it’s just you, or if you have a family to support, take the time to figure out what is needed to cover your monthly, quarterly and annual expenses.
So, yes, you should plan to pay yourself a salary from the start, BUT your budget and lifestyle will probably need to be scaled back during the lean startup process. If you are used to dining out, taking regular shopping sprees, or heading out on annual vacations, you (and your family) may need to decide what you are willing to sacrifice for the sake of getting your business off the ground. There will be time to upscale your lifestyle once again, after your business becomes profitable.
The best way to effectively stretch your startup funds is to eliminate as many financial burdens you are carrying in advance. Clean up credit card debt, pay off loans, and begin socking away a financial buffer for emergencies. When you are in a solid financial position, have a clear plan and budget in place, and have the resources to fund the first 18 months of your business you are ready to go.
To your business success!
For more information –
Estimating Startup Costs for a New Business – Startup Nation
Estimating Startup Costs – SBA
How Much Should You Pay Yourself – The New York Times
When Should An Owner Start Taking A Salary – Entrepreneur ATM – The Toilet Paper Entrepreneur
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Strategies and Tactics for Women by Dr. Shannon Reece 