5 Ground Rules For Entrepreneurs On Setting Their Own Salaries
When new entrepreneurs launch their first business, they may start off with visions of dollar signs floating past their eyes. But as time goes by, it becomes very apparent that entrepreneurs have to make sacrifices for their businesses to become profitable. One of the biggest sacrifices entrepreneurs have to make in their early days is personal income. There are five rules all entrepreneurs should use for setting their own pay and one all-encompassing personal income mantra every entrepreneur should follow.
The All-Encompassing Mantra
If there needs to be a cut in funding to any part of the company to help the company stay in business, that cut should always come from the entrepreneur’s pay first. When the business is rolling and making money, the entrepreneur benefits significantly. But when times get hard, the owner has to make the first sacrifice to keep the business going.
Ground Rule #1 – Start As Low As Possible
The entrepreneur should figure out the very minimum amount of money they need to make each week to keep their personal world going and then make no more than that when starting a business. It is impossible for an entrepreneur to focus on business when they cannot pay their bills but, at the same time, big financial success only comes as the business grows.
Ground Rule #2 – Grow In Step With The Business
Some entrepreneurs will have that first big month and feel it is time to raise their pay to a level well beyond what the business can realistically afford. You should raise your pay based on the growth of the business, and you should only re-evaluate that growth quarterly.
Ground Rule #3 – Keep It Flexible
In the early years of your business, your pay should be flexible when it needs to be. As we mentioned earlier, the entrepreneur is the first one to make a financial sacrifice when the company hits hard times. You should be prepared to put some of your pay back into the business if the cash flow gets slow.
Ground Rule #4 – You Will Not Always Be The Highest Paid Person In The Company
In those early days of growth, you might need to hire professionals and experts that command higher salaries than any other employee you have. Your ego should never get in the way of good business, which means that you should be prepared to not be the highest paid person in your own company in its early days.
Ground Rule #5 – Stay The Course
There are no shortcuts to becoming that high-paid business owner you have always wanted to be. It takes years of hard work and sacrifice to finally reap the financial rewards of owning your own business. But once you get to that point where you are a financial success, you will realize that the hard work and sacrifice was all worth it.
Entrepreneurs often start businesses for the excitement and the freedom to make their own decisions. Smart entrepreneurs do not start businesses to get rich quick because, in the real world, getting rich quick hardly ever happens. By following solid ground rules to paying your own salary, you will contribute to the success of your own business in many ways and feel that much more pride when you finally find success.