Cash is one of the best sounding words in the English language. It’s something that we all need to live, but can be difficult to sustain cash flow when you’re starting a new business. Business owners will often wait years to take any money out of their business to pay themselves due to feelings of guilt. This is a key question for all business owners, when do they decide to pay themselves and take money out of the business. Rob this week talks through why you should be paying yourself first and why incremental increases in that amount are key to not putting your business under too much pressure. If you’ve started a business recently and you're struggling to pay yourself through guilt this is the episode for you.

 

Key Takeaways

Pay yourself first. A lot of people decide to pay school fees, their sky subscription, and everything else before they pay themselves. Have a direct debit out into your savings, and then what’s left is for your bills. Then there is always the question of: ‘What if I don’t have enough money?’ If you didn’t have enough to cover your expenses then at least you know how much you need to earn extra. These costs are not necessarily fixed. There are two ways of increasing your disposable income reducing costs or earning more money. There are lots of ways of earning a bit extra, working overtime, starting a part-time business. Make sure that all that extra income is paid to you however rather than another expense.

 

A lot of people in business wait until two years down the line to pay themselves from their business when they can pay themselves a decent salary. When you start a business you will have a certain amount of investment costs. Even if you don’t have an office or staff, there is still costs needed in terms of time, or hosting. Mark and I didn’t take anything in the first few months, and then we nudged what we took out every month following that. If you nudge your money up that you take out every month it forces growth. If you do this incrementally, don’t take out a large chunk all at once as that will be a bigger shock for your business.

A grand a month extra sales in your business is achievable.  A small increment is much more manageable, something like a 10% increase than taking out a whole salary in one go. It’s more of a shock for your business taking out a large amount of money. If you want to spend £300 every month on a specific item like a car. Then you need to earn £600 a month because there will always be more expenses like maintenance etc.

 

Your future business is the marketing you do today. Spending, testing, and tracking your marketing spend is key. We spend around £200,000 a month on marketing which relative to our turnover, is reasonable. You should be aiming to increase your costs that are linked to sales. Fixed overheads are where you get stuck but variable costs like marketing it’s important to spend in those areas. If you could spend £10 and get £20 back then you would be spending thousands on that.

 

A lot of people have guilt about taking money from their business. You were born to self actualise, you are allowed to pay your bills. You were born as a human being to maximise your potential; earning money and growing your reach are all part of that. You deserve to be paid. If you are selling your business then the value of your business will be devalued if you're not paying yourself enough money.

 

You will be less open to scams when you have cash reserves. They keep you calm. You can pay yourself.

 

Best Moments

‘Pay yourself first.’

‘Starting a business is like planting a seed it won’t grow tomorrow.’

‘If you nudge your money up, it forces growth. You keep down expenses, and drive up sales.’

‘Incrementally increasing the money you pay yourself is much more palatable.’

‘Only draw out what your business can afford.’

‘The business you have today, is the marketing you did yesterday.’

‘Fixed overheads are where you get stuck.’

‘Incrementally is really important.’

‘Incrementally increase your marketing budget.’

‘Don’t grab a load of money from your business.’

‘You might need the cash reserves.’

‘Everytime you increase your income save part of it, and spend part of it.’

‘Always earn more than the expense that you want.’

‘Your future business is the marketing that you today.’

 

ABOUT THE HOST

Rob Moore is the host of the UK’s no. 1 business podcast “The Disruptive Entrepreneur,” as well as an entrepreneur, property investor, property educator, and holder of 3 world records for public speaking. He is also the author of 9 business books, 5 UK bestsellers, and the global bestseller, Life Leverage.

“If you don't risk anything, you risk everything.”

 

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