You are depriving yourself

Hey small business owner. I’m calling you out.

You’re in big trouble. 

Money matters are not to be taken lightly in your business.

For example, pricing your products correctly is the foundation of your career.

I bet all the chocolate in the house that you’re making this money mistake.

You’re depriving yourself (and your family) of your business profits.

In other words, you’re probably not cutting yourself a check at the end of every month.

In this post, you’ll find out why this is super important to do and the formula for how to do it.

Why you should pay yourself

Separate business money from personal money

If you’re making business expenses using money from the same bank account/credit card that you use to spend on groceries, stop it right now.

Business expenses should not be mixed in with expenses for your home, self or family.

Start a separate checking account for your business. This will help tons during tax time.

Doing this simple task will flip a switch in your head and you’ll start taking your business a lot more seriously too.

Set up your bank account with some capital so you have something to start with!

Treat yo’self (be a good boss)

I know you love making products to sell in your business.

But soon, you’ll start to experience burnout because you’re a workaholic (that’s in our creative business owner genes).

Isn’t it time you treated yourself to something you liked – that wasn’t related to work?

Start a garden.

Take a yoga class.

Go to the mall.

Doing things costs money – and these treat yo’self activities should come out of your personal bank account.

So be sure you’re paying yourself every two weeks or at the end of the month, so you can reap the rewards of owning your own business.

Take care of yourself, just like a good boss would.

Save for your future

That car you need replaced?

That kitchen remodeling you’ve been dreaming of?

Your vacation to Hawaii?

Your kids’ college fund?

Your 401k?

You guessed it, these are all expenses you need to pay with your personal money, not business.

Where is all this personal money coming from, if not from regular paychecks to yourself from your own business?

The Formula

This is super simple (if you know how to do simple arithmetic with a calculator) but so many creatives omit this in their lives.

Let’s start by reviewing our pricing formula:

Supplies + Your Time = Item Cost

Item Cost x 2.2  = Wholesale Price

Wholesale Price x 2.2 = Retail Price

It’s easy to fall into the trap in thinking the 2.2x markup in your pricing formula is what you pay yourself with.

[yellowbox]Bonus: Download my FREE and easy plug-and-play pricing calculator to figure out what to price your items under a minute without any math![/yellowbox]

That markup stays in your business until you pay yourself, using this formula:

Revenue – Expenses = Profit (or Loss)

70% Profit = Your Paycheck

30% Profit = Your Taxes

The percentages are variable and can be tweaked to your business and life.

For example, say you wanted to save some Profit in the business for a cool new laser printer. You could then try:

Revenue – Expenses = Profit (or Loss)

60% Profit = Your Paycheck

30% Profit = Your Taxes

10% Profit = Reinvest into the business

30% for taxes is what I’ve found to work for me and my life, however it is an estimate.

After several years of doing taxes, 30% is about how much I end up paying every year including federal, state and self employment taxes.

Let’s do an example:

Revenue this month ($1,000) – Expenses this month ($500) = $500 Profit (yay!)

70% Profit ($500) = Your Paycheck ($350)

30% Profit ($500) = Your Taxes ($150)

Now for the moment of glory:

Write yourself a check for $350. 

Take Action

Every two weeks or at the end of every month, make it part of your routine to figure out your monthly revenue and expenses for your business.

If you don’t make a profit every month, that’s OK.

It’s a good reminder to look at your business as a business and keep doing things that make you money.

So take action now: write this formula down in your journal or print it out and tape it on your computer so you don’t forget.

Download my FREE and easy plug-and-play pricing calculator to figure out what to price your items under a minute without any math: