You are on your way to creating a beautiful business life. The entrepreneur in you is proud of how far things have come. Time is money. All the time you’ve spent in your business has cost you. Find out how to calculate the cost of your time.
Time is money.
You’ve been killing it in your business.
When you started your micro-farm or ranch, you had a good reason in mind.
You are on your way to creating a beautiful business life. The entrepreneur in you is proud of how far things have come.
Your first paycheck hits your hands. The adrenaline is fierce as all the ways you will put the money back into your business seem to leap off your business plan page. You can diminish the debts and expenses you have incurred with this paycheck.
Hold on now.
All that time you spent in your business has cost you, and you have to pay yourself.
Let’s walk through the essential thing you forget — paying yourself.
THE IMPORTANCE OF PAYING YOUR WORTH
I’ll play devil’s advocate: There are THOUSANDS of other ways you could be making money.
Agricultural business is challenging.
Your business will battle against Mother Nature, government regulations, rising fuel and feed costs, competition, and loss.
So, you need to make sure that everything you are putting into your business is paying you back at the end of the day.
How to Calculate the Cost of your Time
Unless this business you created is a hobby, you need to keep a few things in mind.
When you are a solopreneur, you are also an employee.
As confusing as that sounds, it is something to think about now. You couldn’t expect your top hand to go unpaid for weeks or months, or even years at a time. So from the very beginning, you need to pay yourself.
Throughout the last few years, I have come across owners who have limited what they bring home so that their “business will survive.” Think about it; if you were the sole person in your operation and unexpectedly had to hire help, where would you get the money?
Let’s say you couldn’t work in your business for several weeks due to injury or illness. For the sake of the example, let’s say four weeks. You would then have to hire a day laborer for the 2 hours a day you work in your business at $15 an hour.
4 weeks x 7 days = 28 days
28 days x 2 hours/day = 56 hours
56 hours x $15/hour = $840
Do I have your attention?
Your business might be doing so well that you wouldn’t notice $840 in your day-to-day operation. But, if that is true, that’s all the more reason you have been messing up by not paying yourself.
Hold on a minute before you start mentally spending that $840 figure.
Think about what that $840 paycheck would mean for the life outside of your business.
That extra money could send your kids to a great school, be invested in stocks, art, or real estate, or help you pay down your debt. Or, it could just be the natural side hustle income your family needs.
Revisit your why and think about the reasons you started this business. You are not being selfish by expecting the company to pay you.
TRACKING YOUR TIME
Whenever you start or add anything to your business, you automatically need to track your time as if you were an employee punching a time clock. Time tracking will show you how you spend your time.
There are a few different ways to track your time:
- A timesheet
- An entry in your brain book
- Entering your time into Quickbooks
However you choose to track your time, remember to do it consistently, and everything counts.
For example, are you running business errands? Track it. Driving to your lease place? Please write it down. Were you picking up feed? Document it. Were you picking up plants?
You get it.
That also goes for working in your business.
Were you feeding cattle? Track it. Are you mixing milk bottles for your baby calves? Track it. Were you working on your bookkeeping? Track it.
You can delegate these things to someone else. And one day, that might be the case for you. Your dream may be to create this business that makes jobs and only needs you a tiny bit. By tracking your time, you will determine how much it will cost you if and when you decide to hire these tasks out.
KNOW YOUR WORTH
When you started this business, you may have been inexperienced in everything you set yourself up to do. But, the cool thing about being the boss is getting a reasonable pay rate without factoring in your experience.
Before writing yourself extensive checks, you need to think a little.
Yes, you will have to factor in what your business can afford to pay you without going belly up. But, think about all the things you do that those other people would be getting paychecks to do.
Only you can determine this number. You may be scared to take too much out initially, and that’s okay. However, owners are afraid to repay themselves and get the paycheck they deserve more often than not.
Write down your pay rate and how often you will write yourself a check.
HOW TO START PAYING YOUR worth
Remember, I am not an accountant or tax advisor. I give you the information, and it’s up to you and your accountant or tax advisor to help you with the rest.
Different legal entities require you to pay yourself in specific ways.
For example, TXFRS is a single-member LLC. So, I can pay myself in any way that I choose. But, if your business is an S-Corp or Inc, etc., your pay rules will be very different.
In the beginning, you may not have a steady cash flow and cannot guarantee yourself a set paycheck based on your hours. When this happens, look into percentage pay. Then, you would pay yourself a percentage of the funds you receive.
Again, your business is going to vary from someone else’s, but here is an example of what I mean:
You worked four Farmer’s Markets this month. At the end of the month, you tallied up your total sales and came up with $480. Your percentage pay is 15% from the month’s sales (Depending on your business entity) or $72.
Change the scenario however you need to, but you will determine how much to pay yourself for now. Then, as your expenses decrease or your sales increase, or both, you will gradually increase the percentage pay you take home.
MAKE IT STICK
As you can see, you are worth a lot more than you may have given yourself credit for previously. For example, one of the reasons agricultural businesses failed was because they weren’t providing enough money to the owner.
By tracking your time, knowing your worth, and paying yourself, you will continue to build your business on a stable foundation.
Been in business for a while and feel like I’ve hit you with a bunch of new info?
No worries. It happens. Go through the same process as if you just started and pay yourself. Adjust the numbers to fit your bottom line, but pay yourself.
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Your mind is a powerful thing. The way you see your farm or ranch is the way you will run your operation. Change your mind, change your life.
Do you have goals for your ag business? Before you dismiss goal setting for your farm or ranch, do a quick eval on your business. Is your profit where you want to be? If you don’t know, then you need a goal. Let’s break this down into an easy way to define your business goals.