Start Up Business: Know When To Start Paying Yourself

Most business owners will tell you, their greatest source of happiness is seeing that paycheck deposit every other week in their bank account. It's the paycheck deposit that is coming from the very business they were able to start and grow themselves. In fact, most business owners will say that when your business begins paying you, you've succeeded.

So, the question is, when exactly do you start paying yourself? Each case is different. However, there are several considerations you should take into account.

For starters, deciding if your business can even afford to pay you, is the biggest consideration you need to dwell upon. First off, look at what your revenues are and then budget out what your expenses were and what they will be in the short and long term. Whatever you have left over can potentially go to you and your employees.

While on the subject of budgets. Do not forget to pay your quarterly taxes. Businesses are required to pay taxes on a quarterly basis rather than at the end of the year like individuals. Forget to do this and you will be penalized big time, so make sure to stay on top of things.

Most small businesses would suggest that you not take pay for as long as possible and instead continue working with the employer you had before you started the business so that you make doubly sure your business has cash flow. In addition, you make sure that your personal life has some cash flow as well (because personal expenses don't stop just because you become a business owner).

Once you've decided that you can start collecting a paycheck from your business, you should not go out and buy a bunch of expensive things based on what you are currently deciding to pay yourself. Remember, business revenues fluctuate. You could have a good year one year, and then sales could plateau or drop. So always remember to live within your means.

A good meter in deciding how much to pay yourself, would be to look at job sites and see what other people with your position are being paid and then figure out the average for yourself. A lot of people who recognize profit will get excited and then go a little gung-ho on their paychecks. Remember that your revenues need to be steady for the foreseeable future in order for you to continue to be paid.

If you are not an accountant and don't really care to learn the ins and outs of tax law and other nuances, you should have someone else do your payroll. It makes things easier and gives you one less thing to have to worry about (since chances are that you've got enough on your plate as it is).

If you are not sure about the frequency of your paychecks, start out with maybe a monthly check. If things are good, then go to every other week, or whatever you think is best for your individual circumstances.

There is no set formula for when and how you should pay yourself. You just need to evaluate the health of your business to determine if it is feasible for you to start rolling in that dough from being your own boss.