Your Money: Pay yourself first? Last is how small biz often works

Your Money: Pay yourself first? Last is how small biz often works

NEW YORK (Reuters) – Everyone knows the Golden Rule of business is to pay yourself first. But more than half of small business owners are going months without pay – if they are taking any at all.

FILE PHOTO – An employee of a bank counts US dollar notes at a branch in Hanoi, Vietnam May 16, 2016. REUTERS/Kham

About a quarter of these entrepreneurs go two to six months without pay, and another quarter have gone more than six months without salary, according to a recent survey from Kabbage (, a cash flow optimization platform.

The small business payroll servicer Gusto ( finds even more ups and down for its clients. Data on 449 owners shared exclusively with Reuters show that only a handful pulled any paycheck at all in 2018, and the size of the checks varied greatly, with the highest amounts taken in summer.

Average pay chart:

The biggest month for an owner’s draw in 2018 was December, with 73 business owners taking checks, and a median check of $5,944, according to Gusto spokesman Rick Chen. The lowest draws were in January, with just 26 owners taking pay, for an average of just $1,991.

“It’s tough. People have to budget,” said Mike Savage, a certified public accountant (CPA) and chief executive officer of 1-800Accountant (, which offers financial services to small business owners. “We encourage people to budget accordingly – plan for the worst and hope for the best.”


Tony Hernandez, owner of Cienfuegos Cuban Cafe in Simi Valley, California, is among those who have not taken a paycheck at all.

Since he started his food business over three years ago, he has earned tips, but otherwise it all goes back into the business. Some expenses, like his car and gas, get billed through the company. His wife’s job covers living costs and provides health insurance for them and their two kids.

“I don’t know how else I would be able to do something like this without my wife,” said Hernandez, 46.

For Hernandez, long-term planning is less about retirement than about expanding to a second location, with the ultimate dream of a stall at the Los Angeles airport.

“The way I look at my business is: I’m fully invested in this to make it work. That’s investing in my retirement,” said Hernandez.

What keeps Joanne Sonenshine up at night has been the inability to plan. The 42-year-old runs a partnership advisory company in Washington called Connective Impact that helps connect companies to investments with social impact. She regularly takes a salary, but often has to pause it, depending on when clients pay.

The partial U.S. government shutdown at the beginning of the year was particularly crippling, because many of her clients depend on federal funding. Two big contracts disappeared suddenly.

“A huge amount of money went up in smoke. I can’t catch up with that,” said Sonenshine. “You start to worry if you can make it. There’s the fear of failure, the fear of letting your family down. What happens if I can’t pay my taxes? Will the IRS come after me?”


This is, indeed, a daunting year for small business taxes. The Tax Cuts & Job Acts passed in 2017 created a new 20 percent deduction for individuals earning business income – but the fine print is complicated. Those paying quarterly taxes in 2018 before all the rules were sorted out may have to make adjustments. That is on top of the difficulty of figuring out quarterly tax payments on fluctuating income.

“With the new tax law, there’s even more incentive for the self-employed entrepreneur to pay themselves less,” said Savage, because they will avoid payroll taxes and other withholdings and boost their deduction.

While more careful cash management may help control the symptoms, this may be one problem for which there is no cure. Most businesses run on small margins, and they are always expanding so as not to stagnate.

“We’ll always been chasing our tails, in effect,” said Rich Patterson, who runs his own marketing company that makes custom products in Vancouver, Canada.

Patterson, 48, had to pause his pay over the summer, when there was a worrisome lag. “I watch the sales figure really closely, and I knew we were having a good year. It didn’t seem to match up why we were having cash flow problems,” Patterson said.

The choice became paying himself and contributing to retirement or paying his staff. “Honestly, it’s just not possible to pay yourself first,” Patterson said. “I wouldn’t be able to sleep at night if other people are losing out.”

Editing by Lauren Young and Jonathan Oatis

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4 simple ways small businesses can use data to build better customer relationships

4 simple ways small businesses can use data to build better customer relationships

In a world where customers are bombarded across every possible channel with brand messages, targeting is more important than ever before. Small businesses need to be able to make their campaigns feel relevant and personal in order to keep up, but the processes involved – collecting, organizing and interpreting customer data to make it actionable – are often intimidating to small businesses and solo entrepreneurs with limited time and resources.

Collecting, organizing and learning from your customer data is critical no matter how large your team is or what stage of growth you’re in. In fact, there’s no better time to consider your processes for data than when you’re just starting out. And getting started with basic strategies for building customer relationships doesn’t have to be difficult – there are some simple steps you can take to save yourself a lot of time as your business grows and scales.

From the moment you start your business and establish an online presence, you should be laying the groundwork for effective CRM strategies. This includes: establishing a single-source of truth for your customer data, being thoughtful and organized about how you collect information and setting up the right processes to interpret that data and put it to work for your marketing. Here are some actionable steps (with examples) to take now:

  • Collect: Make sure you’re set up to onboard people who want to be marketed to. Whether you’re interacting online or in person, you should be collecting as many insights as possible (for example, adding a pop-up form to your website to capture visitors, or asking people about their specific interests when they sign up for your email list in store) and consolidating them so you can use them to market.
  • Organize: Once you have this data, make sure you’re organizing it in a way that will give you a complete picture of your customer, and make it easy to access the insights that are most important for your business to know. Creating a system where you can easily sort your contacts based on shared traits – such as geography, purchase behaviors or engagement levels – will make it much easier to target the right people with the right message.
  • Find insights: Find patterns in data that can spark new ideas for your marketing. For example, the realization that your most actively engaged customers are in the Pacific Northwest could lead to a themed campaign targeting this audience, a plan for a pop-up shop in that location or even just help you plan your email sends based on that time zone.
  • Take action: Turn insights into action, and automate to save time. As you learn more about your audience and what works for engaging them, make sure you’re making these insights scalable by setting up automations to trigger personalized messages based on different demographic or behavioral data.

Doing this right won’t just result in more personalized marketing campaigns and stronger, more loyal customer relationships – it will also help you be smart about where you focus your budget and resources as you continue to grow.

Opinions expressed in this article are those of the guest author and not necessarily Marketing Land. Staff authors are listed here.

About The Author

As VP of Marketing, Darcy Kurtz leads Mailchimp’s product marketing team. Her team aligns product strategy with marketing execution to make Mailchimp’s sophisticated marketing technology accessible for small businesses worldwide. Darcy joined Mailchimp with more than 25 years of experience leading global marketing at companies like Dell, Sage and Outsystems. She has a career-long passion for serving small businesses.

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