Byte of Prevention Blog

by William Stroud |

My #1 Financial Tip for the Solo or Small Firm

By way of background, early in my career I was self-employed (ate what I killed, as they say) for 8 years.  I was only moderately successful financially, and during this time I got married and had 2 of my 3 children.  I understand the vicissitudes of income to a small business.

Toward the end of my first year, I adopted what would turn out to be the most important financial discipline of my tenure as a small business owner.  I paid myself a salary.

Paying yourself a steady salary forces discipline throughout both your personal and business finances. 

On the business side, it requires that you accumulate operating capital and that you put together a budget of your business expenses so you will know how much you can pay yourself.

It also requires a personal budget so you know how much you need to pay yourself.

As you begin (or continue) to grow the income from your practice, budgets, capital and a steady salary will dramatically alleviate financial stress, making it much easier to focus on building your practice.  In a bad year, your operating capital may shrink, but you can continue to bring home a paycheck.  In a good year, after 12 months of steady paychecks, you can pay yourself a bonus.

On the other hand, even with a practice that produces substantial income, if you get on the merry-go-round of paying yourself as much as your practice produces, you have no saving and budgetary discipline, and you are constantly bumping up against a zero balance in both your business and personal finances, you will feel the full (and unnecessary) brunt of the financial stress of a struggling small business.

About the Author

William Stroud

William Stroud is President of Lawyers Insurance and has managed the NC Bar Association Health Benefit Trust since its inception in 2002. Contact William at wstroud@lawyersmutualnc.com or 800-662-8843.

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