Do you pay yourself first?

How many business owners do you know that are able to keep the business running, paying for all the fixed expenses like rent, power, water, phone, rates, taxes and the other big expenses like staff wages and finally the bank loan or overdraft …

But when it comes to paying themselves, they are the last in line, they often take home just enough to pay the bills but don’t make enough for much else…

These types of business owners will also hardly ever take holidays for two main reasons;

1. They can’t afford it…

2. They can’t afford to pay someone else to keep the business running whilst they are away…

A few years ago I worked with an entrepreneur. Although he was driven, he had not maximised his profits to himself. He realised that he was sacrificing himself for others.

Although that is part of offering a service to the consuming public as an entrepreneur, it won’t make a lasting or wealthy entrepreneur. If your highest values are not being fulfilled and you are not economically viable or profitable then what you’re doing doesn’t have sustainability. And you will probably become burn out doing it all yourself because you can’t afford to pay anyone else.

It is wise and essential to make sure that you structure your business efficiently enough so that you can maximise your service and its perceived value and therefore the amount you charge and the profit you make. If you don’t have a value on making a profit, you probably won’t make one.

Many business owners have found that if they don’t take money off the top at first and put a portion of it into savings, their unexpected bills will keep eroding their potential to save in the end. It is wise to pay yourself first. If you pay yourself last, you’ll risk not having money left over to save.

Some business owners, assume that when they make or have a bit extra, then they will start saving. But it is wiser to save and invest your money upfront instead of waiting for it at the end. It is wiser to initiate a savings and investment habit and you will receive more money to manage.

When you manage money wisely, you receive more money to manage. It is wise therefore to truly have a value in maximising your profits and savings. Without this crucial step your money will not begin to stabilize your primary business and begin working for you.

It is wise to pay things by priority. All of your disbursements including all moneys to you, employees, taxes or anything… are to be paid wisely by priority. Start with paying things that are most important first and least important last. And if you pay things according to priority, money is automatically drawn to where it is managed wisely, and if you manage money wisely, you’ll get more money to manage. You’ll attract more business because you’re more effective and efficient. And you are a crucial priority.

Because if the most important people are paid last you will dis-incentivise them. Those who produce the most; are more crucial than those that produce the least. It is wise to invest your money and energy into those individual or actions that are most important. It is unwise to rob key people of incentive or pay somebody who is not producing at the expense of somebody who is highly producing. You want to make sure you maximise production and reward efficiency.

The company will then change its own profit margins based on where the profits are in the new leader’s value system. There are companies that have huge volume with little margins and others that have low volume and have huge margins.

I know an entrepreneur who sat in his underwear at his computer making three million dollars a month. He was a master of the internet and marketing, looking for highly important items that people were most searching for. He also located on line high quality service or product providers who could fulfil those little niches and he was linking these consumers and providers together and receiving a percentage of each one of those through an affiliate programme. He raked in the money. And he had himself and his computer, and that was his cost. That’s a very high profit margin and low cost business.

I also worked as state manager at a distribution company that had about a 6.5% gross margin and was doing about 300 million turn over per annum. Every year it was highly stressful. Any tiny a little dip occurred it would highly challenge the existence of the company. Both of these two extreme scenarios have something to do with the value system of the directors who were running the business.

It is wise to strategise how you can make your business more effective and efficient and maximise your profits. It is wise to constantly look at how you can restructure your business to make it more efficient. As a business owner you are responsible for constantly restructuring your business to maximise your service and profits or otherwise, if you don’t keep up with efficiencies and expectancies, other businesses will come in and grab your customer niches.

The business world’ is a predator/prey game. There are constant predators out there trying to gain hold of your niche. You can’t be doing what you were doing five years ago. You will be responsible for constantly refining it.

So if you don’t have a value on refinement, you’ll stagnate. And you won’t be able to compete in fulfilling your niches in the world. So you first have to dedicate your life to serving, but you also have to dedicate yourself to refining and maximising your company’s efficiency and profits. So develop the habit of paying yourself first, prioritizing your actions and efficiently serving ever greater numbers of people.

If you would like help in creating a business that works with these ideas in mind, but you don’t know where to start, we can help!

At ABC Business Improvement we have or are assisting builders, tradesmen, retailers, restaurants, wholesalers, manufacturers, professional service providers like accountants, lawyers, pharmacists, dentists, importers/ exporters and we can assist you too!

At ABC Business Improvement we will organise a meeting where you will;

–         Uncover the challenges you are facing

–         Define a path to overcome them

 –         Create a first step plan to move forward

 –         Gain a sense of excitement and relief, knowing where you are going

Be one of the first 5 to contact us this week and we will organise a ‘major in the majors, not the minors’ strategy session today…