Should You Pay Yourself First?  

By: Jim DuBois

Hey, everyone. Jim DuBois here again with another article to get you thinking…. about YOUR pay and how it works or should work. It’s a conundrum almost every window cleaner owner faces, especially when starting a new company. Do you put all the money you make back into growing your business, or do you make sure that you have a personal salary, too?

Hopefully, you began your business with some cushion in your personal savings and some startup money. But the point of going into business for yourself is to make your own living, so it’s important to make sure you’re compensating yourself.

It gets easier as you grow your business. You begin to make more money as you generate more leads and customers. Soon, you have enough to hire good employees and pay them too. But you should be paying yourself first, as an employee of the company.

Why do you need to pay yourself first?

For one thing, if you were still working for another employer, you’d bring home a salary, maybe some commission, if you were in sales. Plus, if you focus on paying all the bills, buying things you need for your business, and paying employees before you pay yourself, you may end up with not much left. And not paying yourself can actually be detrimental to your company’s success.

TIP: Giving yourself even a modest salary can have tax benefits for your business.

Compensating yourself minimizes your overhead, especially during startup. It can also help you make ends meet at home if things get a little tight while you’re building your business or offer protection if your company doesn’t ultimately make it.

In the early days, your salary may be mostly what’s left over after operating costs and bills, but when you start bringing in some consistent profit, figure out what percentage of those profits you can comfortably pay yourself. 

Keep it to a reasonable amount so the IRS doesn’t flag it as suspicious. Consider what you would be paid if you worked for someone else in the same industry, or look up salary comparison sites to see what is average for someone in your position. Don’t be afraid, though, to give yourself raises to reflect your worth, especially as your business grows.

There are other things to consider when it comes to paying yourself, too. If you have a bad week or month and won’t have enough to pay your employees or bills after you pay yourself, put off collecting your salary. Also, ensure you’re building enough of a cushion for your business in an emergency. An accountant or financial advisor can help you figure out the best way to divide income, or hop on a call with me, and I can walk you through this maze so you don’t overpay in taxes.

Two of the things we do at my company are:

1. Put a dollar amount aside every single week into a company savings account. For you, it could be only $100 per week or maybe even $300 per week or more. Build a cushion of savings.
2. We also put a small percentage of every deposit aside into what we call a #2 account or a distribution account. Whatever you want to call it, in my company, this money cannot be touched under any circumstances. Pick a % you are comfortable with it. Something small, so you do it. You can use this for estimated taxes, for example, or distributions later in the year. 

If you need more help unlocking the mystery of building your business, get in touch with us at WindowWashingWealth.com right away. We can help you grow your business with more customers, more leads, and show you how to hire good employees, all to make more money.

Stuck? Facing a roadblock in your business? I can help readers of AWC.

Hop on a free quick call here: Calendly.com/JimDuBois/20-minute