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.