The Formula To Paying Yourself As A Business Owner [Exact Steps]

what's up youtube family this is prince darnell founder of the jumping jack tax franchise i appreciate everybody for watching this video you're in for a treat today we're going to be talking about how much you should be paying yourself as a small business owner as an entrepreneur that question like where like how much should i be paying like what's what's the number and we're going to talk about that today before we get into that first and foremost i appreciate all 83 000 subscribers who are currently in the family as of today who have been watching videos showing love commenting liking sharing this with your family and your friends your other entrepreneur buddies and just learning about taxes and business finance and i'm glad that i can share this information with you for those who are not subscribed and this is your first time watching this video you're in for a treat on my channel because i dropped so many videos from llc to s corp um when to move into llc when i'm moving to s corp how to price your product or service so anything business finance that you need assistance with um and then also give you more of that consultation type of feature as well where like you know a lot of times we need assistance with growing the business and of course with my experience in entrepreneurship for over five six years running a franchise and seeing a lot of the aspects on the taxing this is a great channel for you to plug into so please subscribe if this video becomes valuable to you and lastly as well if you need your taxes completed personal or business if you need life insurance or you need bookkeeping we have some amazing programs and some amazing professionals that are within our franchise that can assist you please send a text text info to 267 text info to 267-792-0185 and also for everybody that's on youtube as well you can follow me on instagram prince.now p-r-i-n-c-e-d-o-n-n-e-l-l i'll drop it here below in the at um and follow me on ig i drop a lot of daily content as well outside of the youtube channel but with that being said let's jump into it now right like how much should you be paying yourself as a small business owner it's a question that's difficult to answer it's a question that you never really have the the exact number because it's based on so many different factors when it comes to your business obviously since i don't know your business and you're just starting out it's so hard so i'm gonna i'm gonna take you through a process of questions that you should be asking yourself and give you a uh a give you a uh a thought process right i wanna give you a thought process that you can start thinking about so you can make a better decision on when it's time to pay yourself how much to do it okay and i'm excited let's go ahead and get into it from here so um you know this is this is a question that's asked a lot i get a lot of direct messages i get a lot of comments in the youtube uh and they're like don how much do i pay myself right so just to start off i always answer that question with a follow-up question i'm going to ask you as of right now and this is the first question i think that you need to ask yourself before you start the business and if you already did go back and ask this question and act as if you're starting from the beginning here's the question i want to ask you with this business that you're starting or have already started do you intend for this to be a side hustle that you want to use to fund your lifestyle and you intend to move on from in the future or do you intend for this to be a business such as an enterprise that you plan to keep for the next 100 years passed down to your family and become the next apple amazon or walmart if it makes it to that level what do you intend for the business to be and that is going to define uh how much your you should start paying yourself from the very beginning okay but you have to understand that what is your goal here because i meet i meet some entrepreneurs who never intended to build this corporate infrastructure have over 100 employees multiple locations and building a brand like an apple there's a lot of entrepreneurs are like yo i don't want that responsibility because it's not for everybody there's some entrepreneurs who are just like hey i want to start this business i'm good at let's say i'm good at e-commerce so i'm good at drop shipping and i know how to make money in it and it funds my lifestyle and it allows me to take that money to put it into other opportunities but i don't want to take it anywhere beyond that place then you got the person that's that's thinking enterprise right so somebody like myself building a franchise i'm i have every intent to build an enterprise right something that's going to last over 100 years so my thought process is going to be different than the person who is just using it to hustle and to really generate more revenue for themselves to be able to go to to move on and use it as a stepping stone jumping jack tax is my only stepping stone right like this is my only one until this is either sold or i'm taking this for the home run so that's the two type of people that i want to talk about today and depending upon which type of individual you are watching this after listening to what i just said you have to make that decision which one are you i want you to write this down are you the side hustle or are you the enterprise either answer is correct and there's no there's no there's no one that's better than the other because it doesn't really matter generating revenue is generating revenue right so i want you to write that down and now that you know which individual that you are as of today right and every business is different too you might find a business that might be an enterprise you might find a business that was just intended for psy each business is individually you have to ask yourself that question okay now with that now let's go ahead and move into these two types of people which will summarize how you should be paying yourself so to start let's say that you're the individual that is that intended to start a side hustle now what i mean by the side hustle is that i intended to start this business but i'm not giving 100 of my time to this business i'm using it i know how to make money in this arena in this skill it makes money and with it making money i use that money to be able to invest into other opportunities whether it be the stock market real estate uh uh other businesses and i might i might have four or five different businesses going on different different side hostels rolling that are generating me a lot of revenue and for that individual if that's you great because i want to talk about you right now if you're that type of person then my recommendation would be to take 20 to 30 of your profits off the top right pay yourself first right and um and use the rest of the money outside of the profits that you pay yourself to actually fund that business it's called the profit first system i wasn't the one who created it there is uh there's a bunch of videos on youtube talking about the profit first system and how you pay yourself first and whatever is remaining whatever's remaining after paying yourself that 20 to 30 percent you're going to use that to actually have as the cash flow of the business to be able to handle your expenses to be able to grow the business and different things of that nature but you're paying yourself first okay because you're using since it was intended as a side hustle you're not going to leave all of your equity inside of the side hustle i want that money immediately i want to reinvest it into other opportunities for me right and um i think that's a great strategy for you 20 to 30 of your profits and i want you to start doing that from the very beginning so that the business can already get used to you taking twenty thirty percent of profits and you knowing how to operate off at a remainder that seventies the business knowing how to operate off the remainder of that seventy percent right um and then the twenty thirty percent is really just based on what you can afford at the time i think 30 is kind of max again depending upon your profit margins which i don't know what your business is you could go a little higher if your if your margins are more spread but um you all you just want to make sure that if you are you are that side hustle person that you know obviously after taking your 20 30 don't overdo it because you obviously still need the business to be able to manage and stand on its own feet and you don't want to have to take some of the profits that you took from the business to put back into the business because the business can't handle its own liabilities so that's the only thing i say for that and you just continue to do that month over month every month draw profits from the business and the only way you could draw profits is of course you need to make sure that your books are in order right because you don't know what your profit loss is and what your bottom line is so make sure your book's in order you know set up a bookkeeping account connect with a bookkeeper we have them at jumpingjack tax so that each month you know what your profit loss is you pull your profits you make sure your taxes are paid for and you do whatever you want to do with that with that money you know ball out go on vacate start other businesses whatever you want to do okay so um you do it at the end of each month so that that's the strategy that i would have for somebody like yourself okay you don't plan to stay in this business for a long period of time and then you have your second person which is the enterprise person so let's say somebody like myself who i've made a conscious decision at this point uh that i am going to stick with this business for over 100 years i consciously made that decision you have to if you're going to move into enterprise you have to really embrace that lifestyle and know that you're making a commitment for a long period of time right and and this is not a commitment that everybody is willing to to to take on it's a huge task building a brand it's a huge task now building employment and corporate locations and that's huge you know it's a lot of responsibility i'm stressed out half the time right so it's not for everybody but if you intend to take this road that's less traveled then uh there's some things you're gonna have to give up that i'm about to talk to now now first like i said for those that are moving in the side hustle you're taking your profits off the top you're paying yourself first you're paying the business second now if you're moving into enterprise if you want to build the apple the amazon the walmarts and the cvs's of the world if you and if you get to that place in life then the business is going to take damn near all of the profits and you're getting what's left the business takes everything right because let's think about this for a second if you're moving into enterprise there's a few things you need to now think about you're going to have to now build infrastructure right and when i say build infrastructure you're going to need them you're going to need staff um with that infrastructure you're going to need corporate you know they're depending upon your industry i need i need the locations i need staff i need a marketing team i need uh like the business will predict what you're going to need to continue to build that infrastructure for you to build that type of brand and a lot of money is spent in infrastructure millions of dollars right you're going to need to be able to if you're going to build a brand to last 100 years you're going to need a significant amount of cash on hand right to be able to weather the storm 100 years a long time you're going to have to weather the storm you're going to need cash on hand such as a lot of businesses couldn't make it through the pandemic because they didn't have enough cash right if you were a side hustle that didn't really matter to you because you were going to start another business anyway but for those that were lasting 100 years you needed cash on hand to cover during pandemic right when when sales dropped on top of that you know i need cash on on him when economic changes arise right like the economy changes what do i do so you're going to need cash on hand you're going to need infrastructure established and that costs a lot of money and on top of that you're going to need to begin to uh position yourself as a competitor in the market right you got to be one of the top top three to five competitors in the marketplace now right how do we how do we do that cash right you have to buy your you have to buy your way into market uh into market dominance right like in order for me to create a dominant franchise in taxes like i'm competing with other big tax franchises that have 50 times the amount of liquid cash that that we have on hand at jumping jack tax so i got to get to that way to that level and you got to pay to play so with that now for that enterprise person knowing that you have to build infrastructure you're about to put your life into this now what happens is you can't afford to take 20 to 30 profits out of your enterprise to be able to pay yourself it's irresponsible okay the business will never be able to flow because the the business need cash in order to go fast so what happens at this point on is damn near all of your profits need to go into the business and from that point on um my suggestion is to only if you're full time in this thing to only pay yourself enough to make sure your bills are paid that food is in your fridge that you have a little bit of cash in your pocket to be able to to be able to move that's what you need to do from for the next five years minimum right to pay your pay your bills food in the fridge a little bit of cash in your pocket anything beyond that is irresponsible for the next five plus years or however long it takes for you to have enough cash established to be able to build however long it takes for you to build your infrastructure to a certain level to where the business has consistency to have a marketing team to where your marketing is consistent to be able to uh to be able like to be able to make sure that your bills can be paid for the next 12 months if necessary for the business like these are things you got to think about and you need significant cash to do that so pay yourself just enough rest of the profits go into that business and you're building up and you're building infrastructure and you're reinvesting through that business for the next five plus years right you have to build a foundation for yourself a very strong foundation so that it can last 100 years which is a very long time okay so you're going to be living off of pennies while your side hustle people are going to be balling out and i think that that's the place that we really have to think about because when you're on social media you're looking like a lot of times we could be discouraged because if you're in the enterprise world you can get discouraged by individuals who are making a lot more cash than you at the at the current point of time and their lifestyles are looking different than yours from an enterprise because they're operating the business differently right but if if i'm in an enterprise i've really got to mind my business and not get fomo or the fear of missing out or seeing other people have all these crazy lifestyles and lambos and different things because that's not where i intend to go as of today my goal is going to be 15 10 15 years from now down the line when i was able to build an enterprise that's now doing 100 200 300 400 500 million dollars a year right because i was disciplined i was consistent the business has enough cash we were able to build infrastructure we were able to acquire other companies and other systems and data and now i have a a very solid company that can last and for the long run you know so but again that decision has to start from the beginning and you have to ask yourself do i intend to do i intend to profit today or do i intend to profit tomorrow that decision will decide how you're going to be paying yourself as a small business owner right um you have to make a decision for yourself i'm not going to give you a number again my recommendation again just to to recap this video and end this off if you're side hustling from the beginning 20 30 of your profits pay yourself first do what you got to do with that money i would suggest reinvesting your profits into other opportunities um into other forms of passive income such as real estate and stock and building up your dividend portfolio and different and rental income and different things so that your business can become passive since you are running a side business you want to create passive income and if you're going enterprise you know you're going to be shorting yourself of profit and only paying yourself just enough at the moment to build infrastructure and to build your marketing and to build market dominance and then in the future now at that point as your business gets more consistency as more profits start to come in and as your bottom line your profit loss statement starts to grow now at that point you now can start making an informed decision on how much the business can afford to pay you as a salary because it's consistently hitting its targets and it's in its kpis it's key performance indicators that that are necessary for you to know that the business is in good health that the enterprise is in good health and that it can take care of its bills it can grow in different things and still pay your salary at the same time you know it took me five years right to get to the place now where where the business is is essentially paying me a salary five years right but again i was and everything i'm telling you guys is something that i've already gone through and i've learned and even then my salary is not even out it's not even out of hand it's literally enough to be able to make sure that my lifestyle is taken care of not something crazy and again everybody's lifestyle of course is different but it's to make sure it's taken care of but nothing extravagant beyond that place i'm not even i'm not vacationing every single month i'm not driving to lambeau i don't got a huge mansion down in the land and multiple houses and condos but i made the decision to do that and there's nothing wrong you have to make that decision to decide what life you want to live in the beginning or which life you want to live in the end okay and that will define what your salary is so i hope that these questions and these thoughts that i was able to give to you today really makes you think right because as an entrepreneur you need to know how to think to make informed decisions for yourself that will affect your ultimate future right and to end it off i'll end off by telling you guys that always think from back to front always think about your end goal first and your exit strategy before you go ahead and start making decisions in the very beginning since i know my exit strategy and i know my end goal when it comes to the franchise and i know where i want to be in the very beginning i made a decision on how i want to operate and how i want to treat myself as a small business owner and how i want to treat everybody else is around me as a team right um you have to do that in the beginning okay and with that being said i hope this video helps please make sure that you watch additional videos if you need help tax wise i have videos on llc versus s corp i got videos on um establishing an llc what you should be doing before setting up the llc these are all things that are going to help you big tax write-offs for small business owners watch those videos plug in make sure you like comment and subscribe follow me on instagram prince.now as well and um share this video with your friends so that they can get their thought process around what they should be doing as well with that said y'all have an amazing day see y'all next video

Channel: Prince Donnell

Views: 21,986

Keywords: bank, prince donnell, cpa, financial, llc, scorp, profit firtst, save money, make money, how to start a business, money advice, dana chanel, jumping jack tax, top 5 banks, wells fargo, pnc, bank of america, taxes, pay your taxes, ppp loan, entrepreneur, money tips, forex, stocks, Investments

Id: lPug59I9BY0

Length: 18min 43sec (1123 seconds)

Published: Wed Jul 28 2021