You need a Surplus to add to your Freedom Generator, so you can continue your journey to Financial Freedom, exit the rat race and start living your dreams. When you have a regular income, finding your Surplus might be hard, but at least you know what your income is, when it’s coming and how much it will be. So how do you pay yourself as a business owner?
What’s Your Profit Goal?
The first profit goal for your business is to have enough coming in to both support your monthly needs and to create a Financial Surplus for your future needs. As a Business Owner, while you’re (hopefully) generating enough monthly income to support yourself, the temptation is always there to ignore your need for a Financial Surplus. But you still do need to pay yourself when you own the business. You also have to generate enough business income so you have a personal Financial Surplus. Having a Financial Surplus is a non-negotiable in your personal finances, and that means it has to be the first non-negotiable in your business. So what do you need to do to make that happen?
What’s Your Minimum Profit Required?
As I’ve said many times before, you can’t figure out how to get to your destination if you don’t know where you’re going. The amount of income you need to meet your monthly needs, including your personal Financial Surplus, and the business expenses your currently have are your minimum profit. If that number is greater than your current business income, you must make changes until you meet the minimum profit amount. And when the two numbers are equal, you can start making plans to grow your business even more!
What Can You Do?
When faced with the task of paying yourself more, you have the same set of choices in your business as you do in your personal finances: decrease expenses, increase income or both. Only the approach differs. First, you must know what contribution you want to make to the world through your business. Second, paying yourself enough so you have a personal Financial Surplus has to be a priority. Don’t make decisions that will cripple your business in service of this priority, but if an expense doesn’t impact your end goal, get rid of it. Eliminate expenses that don’t move you closer to achieving your mission while looking for new services you can offer to increase your professional value and your income.
One of the best ways to tackle this problem, especially when you’re evaluating what services you can add, is to get outside help. Someone who can take an honest look at your business model and your target market can often see the opportunities you’ve missed.
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Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.