Issue link: https://www.massageandbodyworkdigital.com/i/1234356
Financial Literacy Series www.abmp.com/money M i n d Y o u r M o ney 2 020 There are several ways to decide what your owner's draw will be and how to manage your cash flow. In general, we advocate for always paying yourself first, setting aside money for taxes next, and paying bills last. If you haven't been doing this, it can seem utterly impossible, but we'll talk through a few ways to get started, and we'll demonstrate this approach in the video at www.abmp.com/money. First, look through the last several months of income and expenses. You should have a rough idea of how much money you take in and your total expenses. Have those numbers handy. We learned about the ideal bank account setup and tracking income and expenses in the first two columns (catch up at www.abmp.com/ money)—now it's time to put that into action. Decide what to pay yourself by considering the needs of your personal budget. Are you OK getting paid a varying amount every pay period or will you do better with a consistent amount? If you are comfortable with a varying owner's draw, you can configure your pay as a percentage of your gross income or a certain dollar amount for every massage you perform. If you prefer a consistent amount, pay yourself that same amount each pay period and set aside "extra" funds on the weeks your gross income is higher to cover the weeks when your gross income is lower. If this sounds tricky, don't fret. You can watch our demo video and get the customizable spreadsheet at www.abmp.com/money. January February March April Gross income 3200.00 3100.00 2700.00 2500.00 Owner's draw 1200.00 1200.00 1200.00 1200.00 Taxes 520.00 520.00 520.00 520.00 Retirement 250.00 250.00 250.00 250.00 What's left for expenses? 1230.00 1130.00 730.00 530.00 Rent 350.00 350.00 350.00 350.00 Phone 50.00 50.00 50.00 50.00 Web subscriptions/services scheduler 10.00 10.00 10.00 10.00 Email and website 30.31 30.31 30.31 30.31 Misc annual stuff 59.99 0.00 40.00 0.00 Music 5.99 5.99 5.99 5.99 Massage supplies/ 80.00 office supplies 40.16 22.00 0.00 Insurance/ABMP membership 229.00 Property insurance Advertising and marketing 20.00 Licenses and permits 40.00 Continuing education 300.00 Accounting/tax prep 300.00 Business meals 44.10 53.00 Total expenses 590.55 808.30 886.30 728.30 What's left for savings? 639.45 321.70 -156.30 -198.30 Pay Yourself First OWNER'S DRAW In sole proprietorships and LLCs, the amount of money you pay yourself is called an owner's draw. (In a C or S corporation, you would pay yourself a salary, but the ideas that follow still apply.) Sadly, many massage business owners don't intentionally decide how much to pay themselves. They take in money, pay the bills, and then pay themselves whatever is left. But intention is just as important in business finances as it is in hands-on work. "How do I pay myself?" is the most common business money question we get, and the answer can be as complex and varied as our massage businesses. But the answer always begins with intention. Your owner's draw should not be the remainder, it should be a well-thought-out intention. You must pay yourself. You need food and shelter. You need the fulfillment of seeing a tangible result of all your hard work. Unless and until you are taking an owner's draw, you can't make educated decisions about your future and the future of your business. If you are not taking an owner's draw from your business, you don't have a business. You have a hobby—probably an expensive and stressful hobby. It's OK if massage is your hobby and you don't need to draw an income. But be clear about that and make your decisions accordingly. Most of us count on and enjoy income from our businesses, and our finances should be handled with that in mind. There may be a few weeks or a month when you first open your business and you do not pay yourself. But this should be very short-term, and again, intentional. N e w ! A B M P P o c k e t P a t h o l o g y a t w w w. a b m p . c o m / a b m p - p o c k e t - p a t h o l o g y - a p p . 15