How often do you pay yourself from your business’ profits? Are you able to do this regularly?
You likely turned your crafty hobby into a business with some sort of financial gain in mind – and that comes to fruition when you are able to pay yourself for your hard work.
Yet it seems that many of us are not actually doing just that!
This year’s annual survey let me know that 61% of you haven’t paid yourself yet this year (that was a good four months into the year). And it’s important to note that of those respondents, only 24% had been in business less than a year – so you can’t necessarily blame it on being new and re-investing everything back into your business!
So why are so few of us actually paying ourselves for our hard work?
One reason may be that we simply don’t know how. In that case, I’ve got two articles on the methods, logistics and bookkeeping implications of paying yourself here and here that may help you get over that hump.
But I think the biggest reason is that after supply costs, materials, fees, and other business expenses, there’s just not really enough money leftover to pay yourself.
Which means it’s a pricing problem.
It sounds obvious, but I think we forget the very direct link between our pricing and our ability to pay ourselves. We understand that pricing appropriately means we should make a profit, and we understand that having a profit means sales were greater than expenses and thus there’s money from which to pay ourselves.
I like to call this the pricing waterfall, which I have expressed in graphic glory above. The amount you’re able to pay yourself is dependent on your net income, which is dependent on your total sales revenue, which is dependent on your prices.
I think we get the big picture, but that might be where our understanding ends. Seeing just the big picture may mean setting prices you feel will adequately cover your costs AND still allow for profit, but then when you look at your bank account balance at the end of the month it just seems best to leave whatever’s left for re-investing in your business.
Instead of just seeing the big picture, that proper pricing means paying yourself, you’ve got to flip the view. Build the ability to pay yourself into your pricing strategy from the get go. I want you to dig into specifically how your pricing strategy supports your goals to pay yourself. Not just based on a whim or on what feels appropriate, but by actual number crunching and strategic processing.
You’ve got to be able to account for the ability to pay yourself in your pricing formula. Or if you don’t want to use a formula, in your pricing process or your pricing strategy. I want you to get to the point where every time you make a sale, you know that sale price contributes to your overall goal of paying yourself.
Are you looking for a resource to help you do this?
Have you paid yourself yet this year? Are you pricing on a whim or with a strategy that takes your time & value in account? If you don’t feel 100% GOOD about your prices, then I encourage you to check out The Pricing Workshop.
The Pricing Workshop is a course that walks you through both the art & science of pricing handmade. This self-paced course is perfect for you if:
- You still aren’t totally sure what your cost of goods made are
- You don’t know how to account for ALL the costs of running your business in your prices
- You need help building in profit and the ability to pay yourself into your prices
- You spend a lot of time worrying about what your competition is doing
- You feel doubtful you can get sales at the prices you need to charge
The “science” (or math!) part of The Pricing Workshop will break down exactly what I discussed in this article – building the ability to pay yourself into your pricing strategy.
Free Video Workshop on Pricing
Register for our free, on-demand workshop all about the three key signs you need to fix your prices ASAP. We also discuss the three components of a successful pricing strategy.