Last week I chatted to you about the importance of paying yourself a wage from the very beginning of your business (or to start now if you haven’t already!) This week I wanted to take it a step further and determine just how much you should take out of your business, versus reinvest back into it. 

Here’s some things to think about that might help. 

Start with your family’s needs. 

First and foremost, prioritise your family. Start by assessing your personal situation and determine what financial contribution you need to make to meet your family’s needs and maintain a comfortable lifestyle. Remember, taking care of yourself and your loved ones is essential for business success!

Cover your expenses. 

Once you have allocated funds for your family, calculate your expenses. How much money do you need to cover operating expenses, wages, taxes etc and create a rainy day fund. For an excellent resource on managing finances effectively, check out “Profit First” by Mike Michalowicz. I promise it will revolutionise your financial mindset and strategy.

Taking this approach helps determine how much income you need to generate to support your personal financial goals and sustain your business. 

If you reach this point (adding together your personal income needs and business expenses) and realise “Oh my gosh! There’s no way I’m going to generate enough in the business to cover this total!” That’s when it’s time to figure out a way to make more money! And the obvious place to start? PRICING. 

Revisit your prices. 

To bolster your income, consider adjusting your prices. As the end of the financial year approaches, it might be an ideal time to review and potentially raise your prices. Your pricing should reflect the value you provide, including your expertise, qualifications, operational costs, and market trends. Don’t shy away from setting prices that reflect your worth. The goal isn’t to be “just a little bit cheaper” than your competitors! We should never compete on price alone. Your goal should be to set prices that reflect the value you provide. 

Plan for the future. 

Finally, stay proactive in managing your finances, and don’t hesitate to seek guidance when needed. Don’t just make financial conversations a once-a-year occurrence when the financial year comes to an end. I work closely with our financial planner, accountant and bookkeeper regularly to stay on top of everything. I’m not an expert— I lean on them for everything I need to know. 

For a deeper dive on this topic, take a listen to this week’s episode of How to Run a Successful Business (and still have a life!).