Paying Yourself When You Own a Small Business: Ultimate Guide

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If you’re struggling with deciding the right way to go about paying yourself in the early stages of your business, there are two things I want to leave with you.

First of all, that you are not alone. Entrepreneurship is a sea of uncertainty and this is one of many areas that will leave you confused.

Second, sans fluff, this article will clarify the entire process for you.

ULTIMATE GUIDE- A universal revenue model for entrepreneurs and solopreneurs to figure out how to set their pricing, make more money every month and design their dream life.

Evolution of Entrepreneurship

It is rare to find someone with a business idea that’s completely original. The evolution of entrepreneurship has come from building on other ideas and using other concepts as a foundation to build your own.

The unique flavor of your business comes from the changes you’ve made to other business models that came before yours. Of course, by default, you bring something new to the table; your perception of the world, your opinions, and your personal experiences.

Have you ever discovered someone, became interested in their product and found that it was way overpriced? There’s actually a process to how that happens. Consequently, that’s evidence of a frustrated entrepreneur who is on the brink of giving up on their business model altogether.

Entrepreneurs typically rely on the competition to set their prices.

Perhaps because our ideas are not entirely new, I find that far too many entrepreneurs undersell themselves and their work. They assume that because a potential customer can easily find an alternative to their business, there is a ceiling to how much they can reasonably expect to make.

Not so fast, there.

Within the last year, I’ve received many emails asking how one should go about paying themselves in business. It’s taken me a bit of time to figure out a universal way for any solopreneur or entrepreneur to set their prices. If you’re one of the senders of those emails and you didn’t get a response, it’s because it was a struggle not to say, “It depends.”

Before getting into exactly how to come up with a rate or pricing model for your small business, there are some things you absolutely need to clarify.

What materials are you using to build your house?

This is where most entrepreneurs stumble initially, even more so than not understanding their customers. There has to be a core base across all platforms of your business.

Where do you specialize, where do you excel? Where is the majority of your time spent?

If you own a local store and an online store selling the same goods, which are you most focused on? One has to take precedence over the other. I know both have their own advantages, but as your budget grows, you have to be selective about which needs should be met first.

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The same goes for social media platforms.

If you’re on social media, you absolutely should have a profile on as many networks as you can. However, most (if not all) should lead back to your core platform.

Because there are so many to choose from, experts will tell you to focus on 3-4 platforms. That’s crazy. Focus on ONE. (Pinterest is not a social network).

If you’re primarily on Instagram, then use Twitter to share your Instagram feed, use Snapchat to show behind the scenes of your Instagram photos, use Periscope to elaborate on your Instagram captions. Everything points back to Instagram because that’s where your core audience loves you and you want more people to come to the party!

Everything points back to Instagram because that’s where your core audience loves you and you want more people to come to the party!

Make sure each platform has a plan for growth and maturity.

Work on building one social media network, set an end goal for that platform and reach it before moving on to another platform.

Here are some general metrics to help create your social media goal:

  1. a particular number of followers
  2. a certain number of comments, replies, retweets, or reposts
  3. a consistent number of conversions per month

 

You can use any measuring stick that helps you to meet your branding or marketing goals for your business. What may be vanity metrics for one business may not be so for another.

A performer, for example, would be more follower-driven in order to demand a higher pay from establishments. On the other hand, a holistic coach would care less about the number of followers and more about conversions.

Even when it comes to your many, amazing talents, you should focus on developing one or two primarily so as not to spread yourself too thin. You’re a painter, dancer, and yoga instructor. But, which of those skills are a priority for you right now?

Every skill you have is a branch of your personal brand, but they should also be able to stand by themselves with their own audience.

Take some time to think this through, then we can move on to the next step.

The Ultimate Small Business Model to Paying Yourself.

As dictated by yours truly…

The secret to paying yourself when you own a small business is to work backward. Before you offer anything, any product or service, decide how much you want to make and why.

Figure out what you want your life to look like. The most important part of this model is understanding what kind of life you want to design and how you desire to live.

Here are some things to take into consideration:

  • Do you want to move to a bigger city?
  • Are you satisfied with your wardrobe?
  • Do you want your kids in a better school?
  • Do you want to upgrade your car?
  • Would you like to take vacations regularly?

Think of all the crucial ways you want to inject change into your life.

Now, take some time doing a bit of research. Gather information about what this new lifestyle will cost you. How much will it take to maintain this new, exciting way of living?

Decide how much you need to make on a monthly basis to live life on your terms.

If you’re a visual person like I am (sometimes), then you can map this out on paper or take it a step further and create a vision board of your extraordinary life.

No matter what you use for motivation, the key is to follow through with your vision.

Let’s come up with a list of revenue models.

It’s simpler than it sounds. Take about 20 minutes to jot down the best ways to go about structuring your income to meet your goal.

If you want to make $10,000 a month, you can get that in $2,000 increments which is five purchases a month. Or you can earn it in increments of $500 which is five purchases a week.

As you can see in my terribly drawn model below (let’s not judge, today), you can get creative with your model. Depending on your business, you can even split your goal in half and use two completely different factions of your business to meet each goal.

paying yourself revenue model for entrepreneurs and small business owners

Approaching the model above as an author who wants to make $10,000 a month, you can use model C to make money from your book sales and a subscription service while using Model B to make money from tickets to seminars, conventions, workshops, and speaking gigs.

Alternatively, you can just use Model A for bundles, high-ticket conventions, affiliate income, high-quality services for other writers, and other services of the like.

Create your own possible revenue models that reflect how much you want to make and how many ways you can make that amount of money every month.

Let’s check in to the steps completed so far:

PRE-WORK:

Step #1 – Which primary platforms will you be using?

VISUALIZATION:

Step #2 – Design the life you want and figure out how much the lifestyle costs

Step #3 – Make a list of viable revenue models for paying yourself

Not to say it’s impossible, but as an entrepreneur, I have never relied on one, singular revenue source. Why would you want to? That’s practically having a job and leaves little room to do other things that you love. As a matter of fact it’s…. dare I say BORING? A snoozefest.

Understanding how much you can give to your business.

Paying yourself means there’s a primary investment you’ll have to make and most likely that investment is time. There are three things you have to consider:

  • How much time you can dedicate
  • Your skill level
  • What opportunities are available

We’re working backward again! Begin with the third bullet point: opportunities available.

In this case, make a list of all the many ways you can make money in your field. Depending on how immersed you are on in your industry this may take some research. Start by looking at how other successful entrepreneurs in your business are making money, read bios and articles about key players.

At this stage, you should be able to list at least 10 different ways to make money doing what you do without research.

There’s levels to this stuff (in the form of “skill set”). 

As we’re working backward, the next step is to figure out which ones you can pursue considering your skill level. While you may be able to write an ebook, you may not have the skill set to create a masterclass, yet.

If you’re a holistic coach, while you may be able to create simple diet plans, you may not have the skill set to create your own healthy morning smoothies as products, yet.

Yet is the operative word.

No one is born knowing how to do everything, these are ideas you can pursue later, as you learn more and grow in your business. So, don’t cross them out!

Right now, we’re just minimizing your list to focus on what can be done right now and get you paid like.. yesterday.

ULTIMATE GUIDE- A universal revenue model for entrepreneurs and solopreneurs to figure out how to set their pricing, make more money every month and design their dream life.

Time ≠ Money

Finally, we’ll look at how much time you can dedicate to growing your small business. While a single woman (let’s call her Julie) living with her parents has time to crank out and market 10 -15 ebooks, a wife and mother (Clara) of 2 may only have time to do consultations during the day and work on completing a full book in the evenings.

Be realistic about how time you can commit to your business in its initial stages. As an entrepreneur, you don’t need to directly trade your time for money. If you have little time, then focus that time on efforts that have a high payout.

In the example above, Clara will be able to sell her book for a far higher price than the 10-15 ebooks that Julie created and her book has the potential to lead to more opportunities.

On the flipside, Julie may get paid faster and more frequently. Time and money are not linear, it’s about how you invest the time that you have.

The more money you make, the more time you can afford.

You can replace your current income, hire employees, or even make enough so your spouse doesn’t have to work and can help more with the kids.

Your situation now is not your situation forever. 

PRE-WORK: 

Step #1 – Which primary platforms will you be using?

VISUALIZATION:

Step #2 – Design the life you want and figure out how much the lifestyle costs

Step #3 – Make a list of viable revenue models for paying yourself

INVESTIGATION:

Step #4 – Write down ALL the ways you can make money in your field

Step #5 – From that list, pull all the viable money sources based on your current skill level

Step #6 – Narrow down which of those you have time to complete and can fit into your schedule

Putting it all together. Your Revenue Model + Revenue Sources

The final stage is Realization. We’re no longer talking about you. Now, it’s time to combine the two lists you have (list of revenue models & list of revenue sources).

When I’m building a business from the ground up, I always try to see which tasks I can charge more or less for according to my revenue models. Based on the business model I included above, oh heck, I’ll post it again:

How to pay yourself in a small business. Revenue table
As an author, I can choose to use models B & C to reach my goal. I know I can reasonably charge $20-$29.99 for a book. Of course, selling books would have been on my list of viable ways to make money as an author and as indicated in the model, the lowest price point I wrote down was $20. I cannot expect someone to buy a $500 book.

In addition, I know I can charge $50-$80 a month for a subscription service that requires a low time commitment. I know I can charge $500 for one on one consultations, $200 for a writing class, and possibly $300 coaching or mentoring for upcoming writers.

Just go through and keep doing this according to your model. The last two steps are articles on their own, but I’ll give you a brief overview of what to do next.

Make sure you live up to the hype.

1) Create a product or design your service that rises to the occasion of the monthly prices you’ve set. If this exercise suggested that you offer local group sessions for $180, then structure a session that is worth the price of $180. What kind of session would you feel comfortable paying $180 for?

Design your session with that in mind.

and finally…

2) Find a group of specific group people who want what you offer and can afford to pay the price you’ve set. Market to them using the platforms you decided on in the very first step.

Folks, that’s how you pay yourself as an entrepreneur. In conclusion, here’s the final recap:

PRE-WORK: 

Step #1 – Which primary platforms will you be using?

VISUALIZATION:

Step #2 – Design the life you want and figure out how much the lifestyle costs

Step #3 – Make a list of viable revenue models for paying yourself

INVESTIGATION:

Step #4 – Write down ALL the ways you can make money in your field

Step #5 – From that list, pull all the viable money sources based on your current skill level

Step #6 – Narrow down which of those you have time to complete and can fit into your schedule

REALIZATION:

Step #7 – Combine the lists by choosing a model and applying the list of revenue sources to that pricing structure

Step #8 – Design products or services at the level of quality needed to justify the price

Step #9 – Finally, find a group of people who are both eagerly interested about your product/service and who can afford the price you’ve set

You are worth every dime & dollar. 

These nine steps are not only helpful in paying yourself, but they give you the ability to stand behind your prices and set them with confidence.

When doing good business, everybody wins. As a result, your customers get what they’ve paid for and you’ve elevated your lifestyle through entrepreneurship.

There are times I still use this model in the matured stages of my business, perhaps if I want to hit another income bracket or if I want to launch a new campaign.

You’d think that paying yourself is a simple ordeal, but not setting the structure properly from the beginning is why there are so many miserable entrepreneurs out there with failing businesses.

They allowed the market to determine their prices or relied on the customers to tell them how much to charge.

This is entrepreneurship. You’re the boss. You’re in control.

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About the author

Nia

NiaSweetz is the founder of SipBlack- the new digital destination for creative souls to monetize their passion. She's a diversified entrepreneur with a soft spot for innovators who desire to create a lane of their own. With extensive experience in different industries, she's committed to turning your side hustle into a sustainable business.

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