How to pay yourself as a creative shop owner

Oct 18, 2016 | Handmade Business Tips

deborah_engelmajer_profile deborah_engelmajer_title
Welcome! Want to learn how to build a profitable and successful handmade business and sell your handmade products to the world? You're in the right place! Read more ...

what-do-you-need-help-with

what-do-you-need-help-with

I want to read about…

Starting an Handmade Biz
yes please!
Crafting a Kickass Brand
show me how!
Marketing Your Handmade shop
exactly right!
Building Your Online Shop
let's go!
Click here to subscribe
free resource library
read the blog
about and contact page
Many makers struggle to figure out how to pay themselves for the work they do in their creative business. When starting out, it’s all about trying to make sales first; and personal and business finances are often mixed up. There is a better way to pay yourself, pay your bills, and re-invest in your business without feeling like your bank account is a hot mess. Let me show you how.
How to pay yourself in your creative shop. Write yourself a check - Here's how!

Keep your bank accounts separate

This seems obvious but I know for a fact that most people don’t have a separate account for their business and use their personal bank account instead – at least when starting out. If that’s you, this needs to change now. If you are taking your business seriously, you can’t mix your personal/household finances with your business finances. It makes everything more complicated and confusing.

So the first step here is to open up a bank account for your business. It’s also a great psychological trigger and can help you think of your business in a more professional way.

All expenses related to your business need to come out of this bank account (supplies and material, website hosting, etc.).  
All the revenue from your sales need to go into this bank account (yes, even the ‘cash’ sales from your latest market fair needs to be deposited in this bank account).

It’s from this bank account that each month you will pay yourself a wage by having a portion of your revenue transferred into your personal account. This way, you can use that wage for your personal groceries, entertainment, etc without feeling guilty and like you’re using your shop’s dollars!

This simple step will help greatly with organizing your business finances.

how-to-pay-yourself

Cutting yourself a wage

Paying yourself for your work is SO important. Many shop owners do this last, after they’ve paid for their expenses and reinvested a bit of money in their business. That’s not a good way to look at it. You have to look at your wage as an monthly expense and pay it as if you were employing someone.

You wouldn’t pay them last would you? Then, there’s no reason to do that to yourself 😉

“Mmh.. ok so how am I going to pay myself then?” – you’re wondering.

Well, your labor costs are part of your pricing formula (and so are your fixed monthly costs, and your variables costs). The price for each of your item will therefore incorporate your labor cost.  At the end of the month you will have:

Step 1  //  Sales x Price = Revenue
Step 2  //  Revenue – Expenses = Profit

You should use your profit to set money aside for tax, re-invest in your business, and… pay yourself!

Decide on a percentage of profit you want to allocate for each and do the math – here’s an example:

If your profit (after paying your expenses from your revenue) is $1500, you could

  • Put 25% of it away for taxes: $375
  • Write yourself a check for 55% of it (as a business owner): $825
  • Put 20% aside for re-investing in your business, upgrading your equipment, etc: $300.

In our example, that means you pay yourself $825 from your share of the profits 🙂

You have to find an allocation of the profit that works for you of course, starting with figuring out how much you need to be putting aside for tax – but do yourself and your business a big favor and write yourself a check consistently. Pay it into your personal account to keep things separate and organized.

This is the foundation of an healthy business – and life!

deborah_engelmajer_profile deborah_engelmajer_title
Welcome! Want to learn how to build a profitable and successful handmade business and sell your handmade products to the world? You're in the right place! Read more ...
Starting an Handmade Biz
yes please!
Crafting a Kickass Brand
show me how!
Marketing Your Handmade shop
exactly right!
Building Your Online Shop
let's go!
Click here to subscribe
free resource library
read the blog
about and contact page

Grow your handmade shop

access the free resource library

Unlock the library of free resources for makers and handmade entrepreneurs and receive weekly tips and freebies to help you craft a profitable and successful handmade shop!

Powered by ConvertKit

You might also like…

How to deal with bad product reviews
How to deal with bad product reviews
Click to Read
3 Key Elements for a Successful Handmade Shop
3 Key Elements for a Successful Handmade Shop
Click to Read
Announcing Maker’s Biz 2017!
Announcing Maker’s Biz 2017!
Click to Read
How to pay yourself as a creative shop owner
How to pay yourself as a creative shop owner
Click to Read

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Pin It on Pinterest

Shares