Entrepreneurs have it made, you think, striding away from the 9-5 job you just quit. You fully intend to build your own business from the ground up – and you can already imagine the wealthy, fulfilling lifestyle that awaits you.
Finally, you don’t have to wake up early or stay late at the office. You can set your own hours, workload, and even your own pay. You can practically picture the funds in your business account stacking up as customers flock to you. It’ll be your money, and you’re excited to have the chance to pay yourself the profits. You don’t factor into your daydream, as you meander towards your home office, that you’re probably not going to see a influx of clients for several months at least, or that you might not be able to do more than break even for the next few months.
Too often, people buy into the myth that being an entrepreneur is lucrative and relaxing. In truth, it’s stressful and confusing. The fact is, your business account isn’t your own personal piggy bank, and you’ll have to spend a considerable amount of time coming up with a fair salary for yourself.
As you begin to build your business, you’ll need to strike a balance between saving money for your business, and taking enough to support yourself. Unfortunately, the relationship between your personal and business accounts is somewhat dependent: if you can’t afford rent or your credit payments, you won’t be able to direct time and resources towards supporting your business. However, if you take too much from your business and it crashes as a result, you’ll lose your source of income.
You need to level the scale. Calculate your average monthly expenses, and multiply the overall number by 12 to estimate your annual cost of living. That number serves as the baseline for your salary – you can’t afford to give yourself less. Err on the side of caution! Calculate a monthly salary that allows you to live well on a conservative budget.
But don’t strip your wages to the bare bones, either! Financial backers will be skeptical of any entrepreneur who looks as though they can’t afford to take care of themselves, much less a business. Do some research; find out what those who with positions similar to yours are paid, and try to find a middle ground between that number and your expense baseline.
Aspiring entrepreneurs need to seek a financial balance between their personal and professional accounts. While you don’t want to give yourself too much, and short-change your business investment, you also shouldn’t short-change your skills, and undervalue the work you do. Find a fair salary, and take it! Remember, you can always adjust your budgets accommodate changes in your business and personal life down the line.