How Much Should I Pay Myself as a Business Owner? (with Tara Newman)
How much should I pay myself as an interior design business owner? Do I need to have a million-dollar business to be a millionaire? And what does profit-first mean? Tara Newman is here to help you calculate your revenue goal, figure out how much you should be charging for your services, and learn what percentage you should be paying yourself as the business owner.
Tara Newman is the Founder and CEO of The Bold Profit Academy where she teaches service-based business owners how to sell premium services and programs without the emotional stress of launching, worrying about ads, overwhelming social strategies or complex funnels.Tara hosts a weekly podcast called The Bold Money Revolution and has been featured in publications like Money Magazine, Yahoo Finance, and Huffington Post as well as other publications and podcasts.
Tara says that $250,000 per year is what allows you to pay yourself $10,000 a month. It’s not necessarily a factor of whether we should be looking things at an annual basis or monthly basis. Tara works with many business owners, particularly established female experts running service-based businesses. One of the big moments for these women who are experts at what they do, but not necessarily experts at business when they get started, is when they realize they need to replace their traditional salary (which is often around 6 figures). Tara says if you want to be paying yourself $100,000 a year, you need to have business revenue in excess of $250,000 a year. If you’re running a business bringing in $250,000 or less in revenue, in profit-first theory, you should be able to pay yourself 50% of that revenue.
When you’re scaling your business and hiring employees, how do you keep on track with paying yourself adequately within the profit-first formula? As business owners, it’s important to get into a habit of asking yourself, “How can I simplify?” Ask yourself these questions on a weekly basis: What can I delete? What isn’t adding any value to my customer experience? Tara says if it’s not adding to your customer experience, then it’s not adding value to you in the long run. Another thing to ask yourself is what you can automate. There are some great technological options and simple tools that allow businesses to automate more and still maintain a high-touch business. Tara finds that many business owners don’t understand their operation well enough, and they just start hiring employees because they feel overwhelmed. Instead, Tara recommends you stop and check in on how to reduce the overwhelm not necessarily through adding a person. Can better boundaries be established? Is there some clarity we can have around our process? These things need to be addressed before scaling, otherwise you run the risk of complicating your process in a costly way. The ultimate goal of scaling is to increase revenue without adding equal amounts of expense.
How do you know if you’re charging enough for your services, and how do you find out your goal revenue? We all have our own magic number that we need to hit based on our personal financial goals and situation. Tara created a revenue goal calculator that allows you to reverse-engineer your particular needs. When using the calculator, you’ll put in your personal financial needs and then it will calculate what revenue goal you need to hit in order to pay yourself. Check out the revenue goal calculator at theboldleadershiprevolution.com/revenue.
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CONNECT with Darla:
Darla’s Interior Design Website: https://darlapowell.com/
Resources & People Mentioned:
“Bittersweet: How Sorrow and Longing Make Us Whole” by Susan Cain
Revenue Goal Calculator: https://theboldleadershiprevolution.com/revenue-goal-calculator/
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