When I’m consulting with clients looking to invigorate and grow their businesses, one question I often ask is: “Who’s your most valuable employee?” They inevitably give me the wrong answer. They might wax poetic about their rockstar sales person or their dedicated assistant, but they’re missing an obvious point. Entrepreneurs don’t realize that they, themselves, are their most valuable employee, and that is a short-sighted position. You are your most important employee, and you need to treat yourself just as you would any other staff member who’s integral to the success of the company.
Entrepreneurs wear two hats (okay, it’s often more than that.) You’re both an employee and a shareholder. You produce the revenue, and you should benefit from that revenue. Just as you’d nurture a star employee, and just as you’d expect a return on your investment as a shareholder in another business, you deserve – in fact, you’re obligated – to pay yourself for both of these roles.
Why should you pay yourself more?
To avoid being a crutch.
Make a list of your responsibilities and duties. What would you pay someone to do all of that work? If you’re not fairly compensating yourself, then you’re not running your business responsibly. If you’re subsidizing your business by underpaying yourself, then your company is doing little more than limping along. Paying yourself a fair wage forces you to run your business properly and profitably, and is inevitably better for your business in the long run. Too many company founders suffer under the delusion that they must sacrifice income in order to start a business. In fact, the opposite is true: if you start a business and require it to be profitable from day one, you have a much better long-term outlook.
To make yourself replaceable.
Growth comes when you can hire an employee for part of your current workload and free yourself up for bigger and better things. If you’re already paying yourself for the duties you’re hiring for, then it’s an easy transition. If you’ve been volunteering your efforts, then you have to scrounge up the money for payroll – not an ideal scenario. It’s not uncommon to see entrepreneurs running around like one-armed paper hangers, unable to see the big picture for all of their little daily duties. You must be able to afford employees as you grow so that you can keep the big picture in sharp focus.
To keep from resenting your business.
I see it over and over: entrepreneurs who sacrifice their income to help their business limp along. They end up caught in the perpetual cycle of the desire to grow and the frustration of seeing their unsustainable business be unable to support that growth they so desperately want. If you’re getting paid fairly, you’re rewarding yourself for growth. It’s responsible and sustainable, and it breeds success.
To become more efficient.
If you’re writing yourself a paycheck, then your business has to bring in money. It’s that simple. Without the pressure of expenses to meet, it’s easy to treat your business more like a hobby, rather than the entity that lets you afford to live. As your business grows, you should also pay yourself more. Your healthy business should pay you dividends that reflect your hard work, vision, and dedication.
Now you’ll notice that what’s absent from the list of reason you should pay yourself more is a fancy sportscar, or your impending 20-year reunion and your desire to impress the folks who sneered at you in school. Don’t get me wrong, I get the appeal of success, however you measure that.
The reason I’m telling you that you must pay yourself fairly is because it’s better for your business, both in the short and in the long term. Requiring your business to be sustainable is smart. You’ll force yourself to find ways to economize and boost your efficiency. You’ll find that you attract better employees if you realize the value of the work you’re asking them to do. And you’ll realize that growth will perpetuate growth. Creating good habits will yield benefits for the entire life of your company.