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I’ve seen numerous therapists with questions involving the when and how of paying themselves as the owner. You may think you need to reach a specific amount of revenue or be in business a certain amount of time in order to cut yourself a check…not true. Or you may think that you can just use that business bank account like a piggy bank for your personal expenses…not a good idea at all. Some therapists start out with this question of paying themselves in mind, and others just trudge along for years without ever writing themselves a regular paycheck, just taking money out whenever they can to pay for this or that personally. 

In reality, you should be paying yourself as soon as financially possible. No matter how small your business is or how little revenue you’re bringing in, as soon as you can afford to write yourself a decent check, do it, and do it consistently. I’ve talked before about the importance of having a good chunk of money saved when you start your practice so that you can still pay all your business and personal bills without much stress or fear of having to shut your doors. But no matter how much you save, that savings is finite. You’ll need to pay yourself eventually to be able to have a consistent income to live off of.   

So let’s look at the three big questions of paying yourself….  

WHEN SHOULD YOU PAY YOURSELF?  

As soon as possible! Once your reach a point in your business that all your liabilities and financial obligations are covered (i.e. rent, utilities, marketing, and all general overhead and expenses), what’s left over can be used partially for your income. So, write yourself that check!  

HOW MUCH SHOULD YOU PAY YOURSELF?  

Here’s where some people mess up; there’s no real set amount. They’ll often just take everything that’s left over after business expenses are covered. And while that may seem logical, you’ll want to keep some of that money within the business, because when you write yourself that check, that’s another expense just like any other that your business incurs for operation. It’s no different than having to pay an employee you hired, right?  The business is a separate entity and should be retaining an income as well. But how much exactly? While I can’t give you an exact number of course, there’s a few different ways to go about this.   

You can pay yourself a portion of profit. 

Let’s say you have $2,000 left over at the end of the month after all your business expenses are covered. You don’t want to pay yourself that full 2k, as your business needs to maintain some savings and profit within the business accounts. Instead, you would take a portion of it. What percentage is up to you, your needs, and the needs of your business. If you can get by with splitting that 50/50 so you take $1,000 as take-home pay and the business keeps $1,000 to build up savings for future investments or expansion, great. If you need more personally, then so be it; but always be sure you’re leaving something for the business as well.  

You can pay yourself a percentage of revenue  

Some business owners prefer to base their pay like commission, where they pay themselves a percentage of the revenue brought in. For example, let’s say your monthly revenue was $6,000. Your expenses stay the same at $3,000 each month so your overall profit is $3,000. Simple enough? If you want a 20% commissioned income (based on revenue, not profit), then you’ll get $1,200. The rest ($1,800) stays as business profit.  

You can pay yourself a flat hourly rate or salary. 

While the others may fit best early on as your business is growing and your revenue varies, or is just not as high as you need it to be, once those numbers stabilize, paying yourself an hourly rate, or even a flat salary is one of the best ways to go. The reason for this is that you’re then making a consistent fair market wage instead of arbitrary amounts that wax and wane with the seasons. This is also a bit more tedious, as you’ll want to figure out WHAT is a good hourly rate or salary; but this is also where you’ll take a good hard look at just how much work you’re putting into your business. How many hours are you spending each week on business matters? Try tracking that time in detail for a month and you might be surprised just how much time you’re really putting in. What is a fair hourly rate for what you do? Think of it like this….you’re not just a massage therapist getting paid for that hands-on time, but as a business owner you’re also a janitor, social media manager, graphic designer, receptionist, bookkeeper, and so much more. What is a fair hourly rate for someone who can do all of that? 

HOW DO I PAY MYSELF?  

Writing yourself a check or using direct deposit is the way to go. This needs to be tracked as an expense like any other, and categorized as “owner’s income” or something to that effect. It’s crucial that this is kept up in your bookkeeping records like any other expense. It’s also important that you’re consistent with those payments. Whether you pay yourself weekly, bi-weekly, or monthly, once you start, keep it up. A consistent amount on a regular basis gives legitimacy to your books from a financial and tax perspective, but it also of course gives you some regularity in your own personal financial life.  

I know how easy it is to keep pouring everything you have into your business, but just like we say from a self-care perspective, you can’t pour from an empty cup. Or back to the financial idiom, you can’t get blood from a stone. You have to pay yourself as soon as possible so you and your business can thrive. 

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