As entrepreneurs, we’re often driven by our passion to build something meaningful to create a lasting impact on the world. The exhilaration of starting from scratch, breathing life into an idea, and watching it grow is a feeling like no other. But alongside the excitement, a fundamental question often emerges: How do you develop a thriving business while ensuring that you, as the driving force behind it, receive your fair share?
So, if you’ve ever wondered how to ensure business success while protecting your personal financial wellness, you’re not alone. I’ve been there too. This article delves into practical strategies, real-world advice, and the lessons I’ve learned through trial and error.
Crafting Your Compensation Blueprint
To balance fair compensation with fueling business growth, I adopted a pragmatic method:
1. Calculate Your Necessities
In the early stages of my entrepreneurial journey when my business was barely profitable, I created a personal budget focused on necessity line items, such as rent, utilities, food and other essentials. This formed the bedrock of my salary, ensuring I could meet my basic financial obligations.
2. Identify Discretionary Spending
I realized the importance of distinguishing between discretionary and necessary expenses. While it’s tempting to indulge in luxuries, I narrowed my discretionary spending down to what was essential for maintaining my well-being. For me, this meant cutting down on shopping, going out to eat regularly, and making the most out of the items I already owned instead of buying the latest things. I did maintain a budget for essentials like a gym membership and acupuncture to support my wellness routine. It’s important to note that as your business grows and becomes profitable, you should consider adjusting the parameters you put in place so that you’re personally benefiting as your company flourishes.
Fueling Business Growth and Your Wallet
The early stages of entrepreneurship often require a strategic sacrifice. I’ve learned that building something of significance necessitates a certain degree of compromise. Here are practical strategies to consider to get into the right mindset:
Embrace the Lean Start-Up Approach
In the nascent stages of my company, I consciously directed a substantial portion of my income back into the business. This meant making short-term sacrifices by forgoing non-essential expenses like expensive vacations, luxury item shopping, major events and excessive dining out. This approach allowed me to channel more resources into business growth, knowing that these sacrifices were a stepping stone toward a larger vision.
Invest in the Right Network
Recognizing the value of building a network in an industry I didn’t have prior experience in, I allocated a portion of the company budget to paying for industry events and trade shows, instead of paying more to myself. It was through these events that I was introduced to some of our biggest retailers and manufacturers that helped us scale our product production. This early investment in the right strategic opportunities more than paid for itself over time and became an early driving force of growth for the business. Identify investments you can make to enhance your network and access to the people & resources that will drive opportunity & efficiency for your business.
Navigating Financial Uncertainty
Ebbs and flows mark the entrepreneurial journey, and navigating financial uncertainty is integral to managing an early stage business. Balancing my personal compensation with business stability during uncertain times was both a challenge and a lesson in resilience. Here’s how I tackled it:
Build a Safety Net
Recognizing entrepreneurship’s unpredictability, I prioritized building an emergency fund. This fund covered my personal necessities for several months, providing a safety net during challenging periods.
Flex as Needed
During profitable quarters, I celebrated success by channeling a portion of the surplus into my personal compensation. In leaner quarters, I maintained a necessity-based budget, ensuring that my personal stability remained intact while supporting my business.
Prioritizing Your Financial and Emotional Health
Maintaining personal well-being is as crucial as nurturing your business growth. For entrepreneurs, this balance is often overlooked. Here’s how I ensured my financial decisions aligned with my physical and mental health:
Allocate Wellness Funds
I recognized that prioritizing my well-being was non-negotiable. I set aside funds for wellness modalities (like acupuncture), a gym membership, and therapy sessions. These investments were crucial for maintaining the mental and emotional resilience required to lead my business effectively.
Connect with Entrepreneur Peers
As entrepreneurs, we share a unique journey and perspective. I found solace and support in connecting with other entrepreneurs through organizations like Young Presidents’ Organization (YPO). YPO is an organization for entrepreneurs, Presidents, and CEOs of companies of a certain size. It provides mentorship, resources, and many opportunities to connect and forge meaningful relationships with other entrepreneurs from around the world.
Tools and Resources to Navigate Compensation and Growth
To navigate the complexities of compensation and growth, I leaned on various tools and resources that offered guidance and support. Here are a few resources to consider:
• Intuit QuickBooks: A user-friendly accounting software tool that helped me track business expenses, giving me important visibility that helped me balance my business financial needs with my personal compensation plan.
• Small Business Development Centers (SBDCs): These centers offer valuable advice, training, and entrepreneurial tools, including financial management resources – oftentimes, at no cost at all.
• SCORE: A nonprofit organization that provides free mentorship and resources, guiding entrepreneurs through the multifaceted aspects of business ownership.
• Industry Salary Reports: As your business scales and grows, so should your own compensation. Eventually, when your business’ financial profile warrants it, what you pay yourself should at least align with what a qualified person with a similar scope of responsibility in a similar-sized company would expect to be paid. Leveraging insights from recruiting agencies in your industry is a great way to get a sense for this.
Paving the Path Ahead
In the early days of scaling my company, I felt somewhat guilty compensating myself. Every dollar spent on me was a dollar not invested in potential opportunities to grow my business. However, amidst this internal struggle I realized that I am not just the founder but also an invaluable asset to my company. I understood that to lead my business effectively, I needed to prioritize my financial and emotional well-being, as well.
This shift in perspective was transformative, allowing me to not only survive but thrive in my role as an entrepreneur. It’s a lesson I wish to share with you:
“Embracing your value and nurturing your own financial health is an essential aspect of the entrepreneurial journey.” – Nancy Twine
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