One of the most common struggles for service-based business owners is inconsistent personal income. It’s hard to plan your life when you’re not paying yourself regularly. The good news is, it doesn’t have to be this way.
Here’s how to set up a system for consistent pay:
- Establish a Business Structure:
As an S Corporation, you can pay yourself a reasonable salary and take additional distributions based on profits. This setup often results in significant tax savings. - Set a Baseline Salary:
Start by calculating your business’s fixed expenses and average revenue. Then determine a realistic salary that fits within your budget. - Automate Payroll:
Use payroll software to ensure you’re paid on a regular schedule. This automation reduces stress and ensures taxes are properly withheld. - Build a Cash Reserve:
A buffer in your business account helps maintain your salary during slow months. Aim for 3-6 months of operating expenses. - Revisit Your Compensation Annually:
As your business grows, adjust your salary to reflect increased profits and value.
By creating a system for consistent pay, you gain stability and reduce financial stress in both your business and personal life.
Tired of inconsistent paychecks? Schedule a discovery call to set up a payroll system tailored to your business.
