When should you plan to start paying yourself a salary?

Calgary entrepreneurs discuss when it’s time to invest in yourself

“Businesses don’t grow in a linear way. This is the hard part — you have to figure out when your next step will be. Pay yourself a salary when you reach a plateau. Capitalize during this period, focus on the next step, make the right investment, hit another plateau and repeat. That’s my recipe and has worked for me for over a decade. Your best investment is in your own company. If you don’t believe it is, it’s time to do something different.” “When I started my dental hygiene clinic, it wasn’t until the second year when I drew a salary, and it was small. I kept as much money as I could reinvested into the practice to make it survive and thrive, and each year since then I’ve drawn more. The first one to two years less money comes into the practice in terms of sales, so I believe until that scale tips in the other direction you should draw very little.” “I prefer to work like a contractor for my own company. I pay myself from contracts received, with percentages going back into the company. As I’m also an owner, assessing profits, and what to do with them at year end is far safer than drawing too much throughout. As the company grows, that may change, but having that motivating factor of getting paid for contracts keeps you on the ball and hungry.” “Paying myself a minimum salary, and paying the payroll tax now, has a double long-term benefit. The basic minimum salary is paying myself (per The Wealthy Barber). Even if I can live without it, I need to invest in things other than my business to diversify my overall portfolio. It also keeps pressure on me to keep the business profitable for my own well-being. Paying payroll tax (which includes EI and CPP) keeps me assured that if I do ever need those things they will be an option.” “From day one. I’ve seen too many entrepreneurs never put a value on their time. Given how most entrepreneurs in Calgary are in the service business, time and expertise is their commodity. If you don’t put a value on your time, you aren’t pricing your margins and costs correctly and if you’re not calculating this time accordingly you could be operating at a loss. A salary is a good way to ensure that you are valuing your time properly.” “Right away. I’m sure there are a lot of opinions on this but for us personally, we started paying ourselves right from the get-go. It wasn’t much to start with, we ate a lot of pancakes and I know fifty ways to make noodles, but our income increased with our ability to improve the business. Including personal wages/ salaries in our budget (even in the days we couldn’t afford it) gives us an accurate picture of how the business is really doing.” “One of the most important factors in determining the value of a small business is how much money comes to the owner in the form of owner benefits. It’s a sad reality that many small businesses start with the owner sacrificing their own salary at the outset and then never quite catching up. Plan to draw a salary from Day 1, and create that mindset of deserving to be paid what you’re truly worth.” “Start paying yourself a salary right away. The key is making it a consistent amount and taking it on a consistent timeline just as if you had a regular job. Most small business owners get into trouble when they take a bit here and there. This affects your ability to truly understand your cash flow and budgeting requirements, especially if you want to invest more in your business. If you’re bringing in $1 thousand a week and after expenses are left with $850 and can survive on $500, take that and leave the rest in your business for growth. If your business income is sporadic, figure out the minimum amount you need to live, take that, and leave the rest in your business until it’s more stable.”