If you are the owner of a microbusiness, meaning you have fewer than 20 employees, you might be making a critical mistake. And you aren’t alone. Most small business owners are doing it.
It’s not putting yourself on the payroll.
Maybe it doesn’t seem like a huge deal, but as someone who coaches small business owners, the one thing I like to hammer home is this: It’s not a hobby. Your microbusiness is your livelihood and you should make sure you pay yourself.
A microbusiness IS a business
Why? It’s really simple. It’s about your mindset. If you aren’t paying yourself, you probably aren’t taking yourself – and your hard work – seriously. And you also likely aren’t keeping the kind of records you need to apply for a loan (which can, in turn, allow you to grow your business).
In recent months, this was something that came back to bite some small business owners. When the Paycheck Protection Program first started, business owners were eligible for funds to keep employees on the payroll – including themselves. But many small business owners don’t put themselves on the payroll, so they couldn’t prove they needed funds for themselves. In the second round of the PPP, independent contractors were eligible. But if they didn’t have records proving their salary, they couldn’t get funds either.
What I advise clients is this: Treat yourself as an employee. You work; you expect to get paid. Sit down and make a budget. This serves two purposes: It forces you to figure out what you are making and makes you set specific financial goals.
And then, you can use those specific financial goals to go after more business – and keep growing your company.
You don’t necessarily need to hire a payroll company or a fancy financial advisor. You can do most of this on a spreadsheet. Record your income. Write yourself a check and then record it. Document everything!
That way, if you find yourself needing a small business loan or other assistance, you’ll know the exact financials of your company: How much you make, how much you need to make and where you need to grow.
You need to know what you are getting paid, and the best way to do that is to get focused and change your mindset.
At YMT Consultants, we believe in the power of small business. We partner with clients to develop and implement a plan of action so small business owners can grow and achieve their goals. Want to learn more? Contact us today.