We go into business to create more money, more time, and more life… so why is it business owners work 40+ hour weeks and pay themselves so little?

When a business owner chooses to go into business for themselves it takes a lot of courage and willpower. To start the business takes a lot of energy and contains a lot of risk. However, if the new business owner has a strong vision and desire then these adversities can be overcome. Some examples of why new business owners go into business can be because it’s a way of creating more money from the business, or perhaps more free time, or to build a legacy of their own, or ultimately more freedom.

Problems With Time

Many business owners I speak to – before their coaching journey – proudly talk about how they work more than 40 hours per week in their business. Unfortunately, this is nothing to be proud of.

A business is there to provide for you. The ActionCOACH definition of a business in fact is “a commercial profitable enterprise that works WITHOUT you”. If a business owner is working more than 40 hours per week – i.e. the same as they would do in a normal job – then they don’t really own the business; in a sense, they own a job within their business.

Remember, the reason we go into business is to give us more money, more time, and more freedom. If the business is taking up more hours of your life than your previous job did, then what’s the point in having the business in the first place?

Problems With Money

So if business owners are spending more hours working IN their business now, then what is the point?… “But it’s about the money!” I hear you say. Well is it? Let’s think about this.

If a business owner is working more hours, doing the same tasks as they were doing before they had the business, then the most they can earn is still limited to their time, as they’ll  largely be doing operational work. There is only so much one person can earn per physical hour regardless of the industry. That is unless they learn to leverage their time and start thinking more like a business owner, instead of an employee.  Here’s the key point: Business owner is not just a status, it’s a mindset.  How do business owners get paid?  Dividends.  What’s the correlation between time and dividends?  There isn’t one!  (How many hours do you give to the FTSE companies you hold shares in?)

Self-Employed = Paid Time for Money

Business Owner = Paid Dividends

Problems With Leverage

Okay, so now you have moved on from the “time for money” stage and you’re starting to think like a business owner. We go out there into the world of employing new people for our business that as a fresh business owner we tend to have little knowledge about at the time. Employing the people isn’t the problem though.

Let’s say we now have ten employees. They all have roles and they are producing for you in your business. At this point you become the manager too. Most business owners at this point – and rightfully so because it’s what we have always done – now not only have their old job to work on – and run the business – they now have to manage and act as HR for the business too. More work… great!

This is where things go wrong and it’s where the fork in the road happens for business owners.

How Much Are You Paying Yourself

As the business owner, you are now tasked with multiple tasks. You have to do the job, fire-fight, manage people, handle wages, handle HR, run the business, and the list goes on and on. You have just changed your 40 hour work week to a 60 hour work week.

Here’s the turning point question though… “How much are you paying yourself?”

What does this mean? Well on the surface it may seem like I mean how much are you paying yourself in a wage, but… there is a lot more to this.

If you’re still thinking like an employee you will be thinking that you pay yourself £30, £50, £70 per hour whatever it may be, that gives us a nice wage package (compared to our previous job). But the main shift happens when we start thinking differently as a business owner about what we pay ourself.

Think of it this way. The business now needs your help to work on the business not in the business. If we work in the business then yes, we pay ourself by the hour. But as a business owner working ON the business, what is this now worth to the business?

If you were to work in the business like your employees, the most you can pay yourself is what the business allows  you to be paid as an employee. If you work ON the business, then the most the business can pay you is what you grow the business into. For example, if you were to grow the business – by working ON the business – by £300,000 this year, how much can you now pay yourself? What about in 5 years time if you grew the business by £5,000,000… can you see how the business could start paying you differently?

What Should You Be Paying Yourself?

So to wrap this up, the business can only pay you in correlation to its size. For it to grow it needs your time. If your time is spent working IN the business rather than ON the business, then it cannot grow – thus it remains the same, and you remain the same.

Ask yourself this next time you get caught up in your business day-day tasks… “how much am I paying myself right now doing this task?” Is it a £10 an hour task that your admin can handle? Or is it a £100 an hour task that a manager can handle? Or, is it a £1000 per hour task that will grow your business.

As the business owner you have the choice to manage, delegate and lead your team. Be sure that you give you the right tasks to the right people and that your time is best spent doing the most productive tasks that only you can handle… building your business.

Shift from the employee mentality to business owner. Think of it as planting the seeds for the future of your business. What tasks are you doing and how much are you paying yourself?