One thing that surfaced from my conversations at a JLC Live show was the number of company owners who are not paying themselves for their work. Gang, let’s look at the Ten Cardinal Rules, Rule # 10. It says: You shall take a fixed salary from your business each month.
Four points I would like to make:
- If you are not paying yourself, you are not charging enough for your work. No ya-buts. Let’s get real – if you aren’t being paid for your work, you don’t have a business you have a nice hobby. You should be paid a salary to run your business, that salary is part of your overhead expense.
- Are you paying your spouse for his or her work in your business? If not, you are not charging enough for your work and when your spouse reads this, if they are smart, they will quit. Why would anyone work for nothing? (If they are working on jobs, their time is a job cost – if they are working in the office, their time is an overhead expense.)
- If you work on jobs, are you paying yourself for this work? If not, you are giving your time away for free. Your time to work on jobs is part of your job cost.
- You should figure that a normal workweek for a business owner is about 50 hours a week. If you are working 10 hours a week on jobs, that is 20% of your workweek. That is also 20% of your time that is not spent running your business. You can’t pay yourself as a full-time salaried owner (Item #1 above) and a part-time job cost, that’s not reasonable. So deduct 20% off your salary as owner if you are spending 20% of your time working on jobs. Then pay yourself the correct hourly wage for working on the jobs.
It is nice to have a hobby, but it’s probably not the reason you are in business. Pay yourself for your work. When you do, you will be able to provide for your family. If you depend on your spouse’s income to support the family and pay the bills, you have a hobby. And a patient spouse.
The only way you can pay yourself fairly is if you charge the correct price for your work. If you want to know how to do this, read our book, Markup and Profit; A Contractors Guide. And if you want to sell your work at that correct, fair price, read Profitable Sales; A Contractor’s Guide so you will know how to sell it.