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When should the owner of a new business start taking a paycheck?

  • September 6, 2009 - 2:26 PM

Q I have been in business with the product I created, OnTray, since June 2007. I am making enough money to pay OnTray's bills and throw right back into the company, basically keeping the business afloat. At what point should I start to pay myself and make that a "bill," too?

LAURA HAMRICK

ONTRAY

A This is a tough question for most business owners. At some point, you need to start paying yourself, or it doesn't make sense to be in business. On the other hand, there is a tradeoff: Any money you take out of the business now is not there for business development, and money invested in the business now may lead to higher financial returns in the future.

So the answer to this question partly depends on your personal need vs. the business need. If this business is your only source of income and you need the money to support yourself, then it makes sense to put yourself on the payroll sooner rather than later. If not, and the business could really benefit from the extra money, it might make sense to invest it in growth opportunities: new products, marketing efforts or getting into additional retailers.

You have been in business for two years and have probably asked yourself on occasion (or very often) why you are doing this if you are not getting paid. After putting so much time and effort into your business, it is very gratifying to take your first "paycheck," no matter how small it is. If you feel as if it is time to get paid and the business is generating enough cash to pay you, then it probably is.

JAY EBBEN

ASSISTANT PROFESSOR OF MARKETING,

UNIVERSITY OF ST. THOMAS OPUS COLLEGE OF BUSINESS

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