Pay yourself first? What's this mean?

Discussion in 'Starting a Lawn Care Business' started by billc, Feb 26, 2004.

  1. billc

    billc LawnSite Member
    Posts: 119

    In the "Tips" section, eslawns wrote:

    <b>"Pay yourself first. No, I don't mean salary. I mean invest. 10-15% off the top. Don't convince yourself you can't afford to. You can't afford not to."</b>

    What does this mean??? Buy stocks? Real estate?

    What have any of you done?
     
  2. lawnGUYnMD

    lawnGUYnMD LawnSite Member
    Posts: 72

    I would say it is saying to make sure you are making a living by paying yourself first and then go thru paying everything else. Alot of people will pay everything else first and then they have nothing left and are struggling.
     
  3. LawnScapers of Dayton

    LawnScapers of Dayton LawnSite Silver Member
    Male, from Dayton, OH
    Posts: 2,574

    It goes back to the old saying of setting aside 10% for retirement. Hence, the "No, I don't mean salary" statement.

    Derek
     
  4. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,414

    The money is either there or it isn’t you can't pay yourself what you haven’t made and if you do you will end up like my ex employer always bouncing employee checks owing 46k in sales tax having your f350 rack body reposed losing key employees because they get sick of the games and being banned from all the local suppliers because he’s bounced checks on every nursery in 2 counties lot of good paying himself did him. What he needed to do was clean up his books and bill at the proper time of the month and budget his expenses if you are careful and do you job well there should be plenty of money left over after all is paid.
     
  5. ALL AMERICAN

    ALL AMERICAN LawnSite Member
    from Austin
    Posts: 21

    Reading assignment:

    The Richest Man in Babylon :D
     
  6. billc

    billc LawnSite Member
    Posts: 119

    Waiting for this one from amazon.com, too!
     
  7. mtdman

    mtdman LawnSite Gold Member
    Posts: 3,137

    I am not necessarily sure about the "paying yourself first" idea. In most small businesses, ie--retail, you don't make any profits at first. Often you lose money at startup, and bills like payroll, inventory, etc HAVE to be paid in order to stay in business.

    Lawn care is a bit different, I believe. The overhead isn't as high as in other businesses, if you do it right. You can turn a profit early on, but if you decide that your salary is more important than investing in the business, you're not going to go far. Going into business doesn't always mean making money for yourself up front. Sacrifices have to be made for the business in order to make the business successful.

    I spent my first 2 years doing this as part time. The first year my partner and I pretty much made enough to pay for our crappy equipment. 2nd year we put aside money to upgrade our equipment, become more efficient and professional. We did make enough to pay ourselves a modest income that year, but nothing great. If we hadn't put aside savings and invested in our business, but bled it dry to take home a few extra $$, we would have been stuck pushing 21 inch crapsman mowers and doing scrubby work for the next year. And chances are we wouldn't have been able to double our workload in our 3rd year.

    I'm not in this business to go broke, don't get me wrong. But being in business for yourself doesn't mean you're going to get rich. Being successful means looking ahead and planning for the future. Sometimes you have to lose a little at first to make big steps in the future.

    Now, if you've been in business for a while and you can't seem to make ends meet and you're not turning enough profit to earn a living, it's time to re-evaluate your business and what you are doing.
     
  8. ALL AMERICAN

    ALL AMERICAN LawnSite Member
    from Austin
    Posts: 21

    The whole concept behind paying yourself does not mean to pay yourself before your bills. In simple terms it means that if you make (for example) $1,000 a month after all your bills are paid and this is what you have to live on, you should save 10% minimum of that $1,000. It's another way of saying that you will never have money if you don't save. Learn to pay yourself FIRST, have the beer and other pleasures later, when you can. Three great books to read:
    Richest man in Babylon
    Who moved my cheese
    The greatest salesman in the world
    :)
     
  9. swim

    swim LawnSite Senior Member
    Posts: 357

    I'm going to say that I think it means to reinvest 10-15% of your money into your business. For whatever you think you need improvements in. Wither it means better equipment to make you more productive, better or more advertising to pull in more customers, or whatever needs to be improved to make your business grow.

    If you don't it won't be long before you are out of business.

    I find it very interesting how so many people can see the exact same information to mean so many different things.
     
  10. ALL AMERICAN

    ALL AMERICAN LawnSite Member
    from Austin
    Posts: 21

    Read the book.

    :)

    Not to say that you can't do that for your business...that SHOULD be a common business practice.
     

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