I deserve a pay raise. As a business owner, I’ve scrimped and cut corners through lean times. I’ve given employees raises and spent money to upgrade equipment. It seems like there’s never enough. My family is pressuring me to increase what I bring home. As an owner, how do I get paid properly for my hard work?
Thoughts of the day: Business owners deserve a pay raise. They work for both short- and long-term gain. Ensuring the business is sufficiently profitable at all times is an essential owner’s responsibility. Timing is everything. Make sure you’re doing more than working for low wages.
Business owners deserve a pay raise
Being a business owner is a balancing act. Rewards come in many forms, including salary, which is the short-term reward; distributions, which are the medium-term reward; and increased valuation of the business, which is the long-term goal. It’s a matter of getting it right in all three categories, all the time.
Job number one is to figure out where any immediate shortfall is coming from: not enough clients, not enough profit per client, too much spending, not enough future planning, etc. Ask employees to make suggestions for improvements. As things improve, define how much of that goes into a raise for you and distributions at year’s end. Owners deserve a pay raise. How much gets plowed back into the business to build exit value. Put it in writing and stick with the plan.
Make sure family and employees understand what you’re working to accomplish. Listen carefully when they challenge you. Ask yourself: What could be done now to improve results by year’s end?
Paying yourself is not always easy
Think about long-term value as well. What will the business be worth when you’re ready to exit? What will you be selling and to whom? Work backward from that endpoint to today. Layout the actions needed to get from here to there.
Your job as CEO is to set direction. Make sure goals are in place. Build budgets and forecasts to match goals. Recognize and reward – hard work deserves a pay raise. Hold people accountable for delivering to goals and staying within budget. When people are struggling, evaluate if they’re in the right seat on the bus, belong on the bus at all, or if they need more training and time to develop. Do the same for vendors and customers. When the business is in trouble, call in extra resources to assist before problems become crises.
You won’t have the perspective, time, or energy needed to be an effective CEO if you’re running around making things happen with day-to-day activities. Build a team that can help the business move forward. Learn to delegate instead of doing. Follow up to ensure things went as expected. Learn to ask, “Who can get this done?” Step back. Make room for other people to contribute.
Grow and become profitable
As CEO, you’re multitasking all the time: ensuring the company today has enough great customers willing to pay for today’s goods and services, as you invest to ensure that tomorrow’s customers, income, employees, products and service are as good as, or better than today’s. Build reports and set aside discussion and analysis time so that it’s easier to see if things are on track.
Test your growth plan for the business. Does it generate enough profits to pay the owner fairly, pay taxes, pay off debts and add to reserves? Can you minimize the risk of having to put in funds in difficult times? Remember profits today tend to lead to profits tomorrow. Shortfall today may be nothing more than accepting excuses for an underperforming company. Make sure you’re demanding enough of your business so that you can respond positively to your family’s challenge of ensuring you’re compensated fairly.
Looking for a good book? “Keeping the Family Business Healthy: How to Plan for Continuing Growth, Profitability, and Family Leadership” by John L. Ward.
