Holly Howard runs Ask Holly How, a small business consulting company based out of Williamsburg, Brooklyn that works with a wide variety of businesses from restaurants to retail to art studios and pretty much everything in between. Her clients report increased income and profit, decreased expenses and a significantly better quality of life. Holly heads up the Small Business Book Club at McNally Jackson Books.
Want valuable insight into how to grow your business? Holly hosts FREE 30 minute strategy sessions at The Yard in Williamsburg. Email her to set up a time firstname.lastname@example.org or to ask a question for the next Ask Holly How.
I’m totally at the end of my rope. I opened a restaurant here in Brooklyn about a year-and-a-half ago and while it has been busy, and customers are coming in, I still haven’t been able to figure out how to pay myself. This is a labor of love, but if I don’t start taking home money soon, I’ll have to close my doors. Every time I think I’ll be able to start paying myself, another cost comes up that seems to take priority. What am I doing wrong? I feel totally discouraged at this point. Please help.
Working for Free
Quite frankly, that’s no way to live! No one wants to work without pay, no matter where you stand in the company. That being said, there are a few thing you can consider in order to turn this situation around. And, to offer you some comfort, I see too many entrepreneurs who never pay themselves, so know that you’re not alone in this mistake.
When we start a business, we are typically trying to cut as many costs as we can, and we tell ourselves that we can make it on very little. The problem with that is that once we cut ourselves out, it becomes a bigger hurdle to factor ourselves in down the road. I have a “pay yourself first” philosophy. You must be honest about what you need to make to support your life, and then you have to determine what you can honestly make through your business. Make sure you’re not trying to squeeze water from a stone.
Another common mistake I see entrepreneurs make is that they put everyone else’s needs before their own. Even if they are working the day to day operations, they still overlook their own expenses. They never pull themselves out of this cycle. They are more likely to give a manager a raise instead of taking home a base pay themselves. If you go down this road, you’re less likely to be able to turn things around.
So, what can you do now? Start small and create a plan to increase your take home pay over the next six months to a year, and make this non-negotiable. Maybe you start with $250 per week, or maybe $400. Review your payroll numbers and set a goal that eventually makes your take home comparable to your highest paid manager. It would be helpful to consult your accountant as well to create this strategy. After all, they know your financial situation just as well, maybe even better than you do. They can help you see where you might need to increase sales or cut other costs within the business to cover your own compensation. It’s an intricate puzzle, and you want to make sure you are making calculated changes. If finance isn’t your strength, ask for help.
Good luck and remember: if you’re not paying yourself, you don’t have a business; you have a hobby–a very expensive hobby!