Your Business Is Growing. Has Your Paycheck?

As the business changes, the way you think about paying yourself should probably change too.

If your business has grown but you're not sure whether you're actually benefiting from that growth, a Financial Clarity Call can help you look at profitability, owner compensation, and what the business is truly producing for you. Book here.

When you first start a business, paying yourself is often pretty informal. You take what the business can afford, leave money in when things are tight, and perhaps take a little more when you've had a particularly good month.

That makes sense in the early years. You're building something, cash is precious, and you're willing to make sacrifices because you believe in where the business is going.

The problem is that some owners are still operating this way years later. The business may have employees, significant revenue, established customers and considerably more complexity than it did when it started. Employee salaries have increased. Rent has gone up. Suppliers charge more. The company has invested in new people, equipment and technology.

Yet the owner's compensation is still treated as something that can be adjusted whenever the business needs a little more room.

When Did Paying Yourself Become Optional?

Owners have an unusual relationship with their company's money. If payroll is due, employees get paid. If rent is due, the landlord gets paid. If an important supplier sends an invoice, you make sure it's taken care of. But when cash gets tight, the owner's compensation is often one of the first things to change. Once or twice, that may simply be part of owning a business. When it becomes normal, though, it's worth paying attention to.

If the business can only maintain its current operations because the owner routinely takes less than they should, that's important information about the economics of the company.

Your Pay and Your Ownership Aren't the Same Thing

There's another distinction that can get lost as a company grows. You may perform a job within your business. Perhaps you're still responsible for sales, operations, leadership, client relationships or some combination of all four. There's value attached to that work. But you're also the person who took the risk of building the company in the first place. Those are two different things.

An owner can spend years building a multimillion-dollar company while continuing to think primarily about what they can afford to pay themselves this month. Revenue grows, the team grows and the responsibilities grow, but the financial benefit of ownership never seems to grow with them. At some point, it's reasonable to ask what the business is actually creating for you.

Revenue Isn't the Same as Personal Wealth

This is one of the stranger realities of entrepreneurship. You can own a business with impressive revenue and still feel financially constrained personally. That's because revenue tells you how much money is moving through the company. It doesn't tell you how much value the company is creating for its owner.

If every additional dollar of revenue requires more payroll, more overhead, more working capital and more of your time, a larger business doesn't necessarily create a wealthier owner. Sometimes it simply creates a busier one. That doesn't mean the answer is to start pulling significantly more money out of the company. There may be very good reasons to retain earnings, build reserves, pay down debt or invest in future growth. The important part is that those decisions are intentional.

What Is the Business Supposed to Do for You?

Owners spend an enormous amount of time thinking about what their businesses need. What does the team need? What do customers need? Where should we invest? What should we hire for? What's the next opportunity? There's another question worth asking occasionally:

What do I need this business to do for me?

Maybe you're building something you eventually want to sell. Maybe you want reliable income and more time with your family. Maybe you're trying to create long-term wealth. Maybe you want to reinvest heavily for another five years because you see a much larger opportunity ahead.

There isn't one correct answer.

But after years of building a successful company, your compensation and financial return shouldn't continue to happen by accident. The business should have a purpose in your financial life, too.

If your company has grown but you're unsure whether that growth is translating into enough financial benefit for you as the owner, a Financial Clarity Call can help you look at the bigger picture. Book here.