Does your business pay you a liveable wage? If so, that’s a huge win, congrats! If not, don’t fret, you aren’t alone. Many small business owners struggle to take their business from startup to profitability. So if you are burning through savings, working a job plus your business, or living as minimal a lifestyle as you can in an effort to get your idea off the ground, let’s talk about what you need to do to build a sustainable business that pays you a livable wage.
Small Business Stats
First things first, let’s cover some small business salary stats.
According to Tidio, the average small business owner’s salary is roughly $60,000 per year. Not bad, but we need to consider this statistic in relation to our region’s demographic data. The average annual income in Cookeville as of the 2020 census was $43,000. Based on that information we can likely estimate that the small business owner in Cookeville is making less than the national average.
With our region’s cost of living being lower, a $40-$50k per year salary can be a comfortable wage depending on your lifestyle and financial situation. So you need to figure out what the necessary small business owner salary is for you and if your business can provide that.
Do the math
Step one to getting your business to profitably is to do the math.
When you start a business it’s essential to run the numbers and figure out how much you can expect to profit from the endeavor.
Here’s what you need to know about your business:
- Startup costs
- Ongoing fixed and variable expenses (not including your pay)
- Realistic, conservative estimate of your anticipated revenue
Once you know your business costs and estimated revenue, you need to figure out what you need to survive financially. Tally up all your personal expenses for a year including taxes. This will give you the lowest possible salary you can live on.
With all these numbers in hand, you now have a clear picture of what your salary needs to be and if your business can realistically meet that.
Have reserves
Typically when you first start a business, you aren’t profitable and likely can’t pay yourself. This is why having a reserve of money to live off of the first year is key.
As you get your business off the ground, start to understand your sales trends and deal with unexpected expenses, taking away the burden of having to pay yourself will give you loads of stress relief. If you can, have a year’s worth of living expenses saved so you can focus your energy and resources on the business.
Side hustle
I realize not everyone has the resources to fund the start up of their business plus have a year of living expenses saved and that’s okay. There’s another option. Enter the side hustle.
Oftentimes to get a business off the ground, entrepreneurs will operate their business as a side hustle while still maintaining a part-time or full-time job. This is a completely viable path and honestly one that allows you to test your concept before diving in with both feet.
As you balance the employee/side hustle life, stay focused on running a lean business and stockpiling your profits to prepare yourself to launch full time into your business.
Focus on getting customers
As we always say, “businesses don’t fail because they have no money, they fail because they don’t have enough customers”. Your number one job as a business owner is to get customers. Customers lead to revenue. Revenue leads to profitability. Profitability means a paycheck for you.
So the key to taking your business from startup to profitability is to effectively use marketing and customer service to build your customer base.
Conclusion
Owning a business is fulfilling, but it’s also a lot of work. Most entrepreneurs are willing to pour their blood, sweat and tears into the business they’re passionate about. There’s nothing wrong with that, you just need to make sure all that hard work can eventually pay off and provide you with a liveable wage.
If you are feeling overwhelmed by this topic and need help figuring out your business finances, goals or marketing strategy, we’re here to help. Book a free business coaching session with one of our business coaches.
