If You Are Not Taking A Paycheck

I speak with so many entrepreneurs and small business owners who are totally committed to their vision, who work endless hours and sacrifice themselves, their families and yes, their business, by willingly not taking a paycheck. Instead they leave the cash in the business to support the business operations.

That’s nuts! Ask your wife what she thinks about this plan. We all know the answer, yet so many of us still continue to do this.

I will admit, I have been there and done that. I understand the pure selfless intent of the entrepreneur, the small business owner who on a mission, willing to do whatever it takes to succeed even if it means sacrificing one’s self and family for the sake of the vision. I understand, but now I realize the futility of this strategy. It makes little sense. Ultimately it is not only counterproductive and self-destructive, it really is an indicator of deep systemic problems in the business that can and must be fixed or success will never be achieved and the entire mission deemed defective.

Simply stated, if the owner cannot take a paycheck out of the business two facts are clear:

1. The business is inadequately capitalized for the current operating format.

2. More than likely, many other necessary requirements are also not getting funded as everything deemed not critical for success is deleted in such a situation! The advertising budget is likely zero, inventories are scant, etc.

Such a situation is guaranteed to fail as the necessary requirements for success are unavailable, so what’s the sense of the entire mission? All of the sacrifice will be for naught as the plan is deficient.

I appreciate the selfless willingness to sacrifice. However, if it means the plan is deficient, the cash flow not effectively monitored and allocated, the plan is out of balance and requires massive adjustment or it must be abandoned. I suggest the business owner stop the insanity which is doing the same things you always do and expecting a different result, and reframe the cash flow proforma and recast the business based on available capital to work, not merely subsist.

Adjust the overhead, change the employment base, add marketing, and get smaller in order to force profitability and relaunch. If this cannot be done you are either blinded by your vision and refuse to make the major changes required to support a successful business or the business formula is not viable and should therefore be abandoned.

Simply stated, if you fall into this category, you are one among many. But you must get over this ego-driven mission of self-deprivation for the benefit of the vision and recognize that the vision is defective. Success under these circumstances is nearly impossible. Why do it? Make the changes required or liquidate. That’s the message and the learning.

If the business model cannot support the payroll – including the owner – the business plan is inadequate and must be adjusted immediately. Success is unlikely under such circumstances so why waste the time, the energy, the capital resources and effort? This is not an easy decision, but it is the right one.

Call me if you need help in working through this dilemma.