How to Pay Yourself as an Owner | USING DEBT to GROW Your Business FAST!

Look at your business as a money machine, your small business as a money machine to where you put a dollar in and you get $2 out on the other side. That's what, that's why I'm very hesitant to tell people, just go get loans.

How do you suggest business owners pay themselves a percentage of profit each month or salary? We are a small business still growing and it's hard to decide sometimes if we want a paycheck or to invest in a business while we are profitable. Our personal income is very inconsistent. Yeah. So before you even start a business, in my opinion, it's like, let's pare back our personal expenses to exactly what we need to be able to afford just to get by. Pay for rent, pay for insurance, whatever you need to get by. For some people, they need health insurance to be able to just feel like they can go take the step into self, self employment entrepreneurship. Great. What is the bare necessity that you need personally? That's, let's say it's $1,000 a week or $800 a week, whatever. The smaller you can get it, the better. Usually the sooner you'll be able to start the business and the more money you can invest back into the company and grow it faster. But get that number. What is that number? Let's say it's, let's say $800 a week. So you know, I've got to get $800 a week just to cover my personal expenses. And I know that because I've budgeted, I've put everything together, I've tracked my numbers for my personal finances, for rent and all the rest of it, food, et cetera. Bam, there it is. That's what you should be, auto debiting, auto debiting, auto depositing, whatever from your business account into your personal account. At the beginning, it doesn't really matter. Everyone's like, well, should I do myself as a W2? If you're an LLC, there's no point in doing a W2 to yourself. Obviously talk to an accountant. But with an LLC or an S corp, any profits in the business are going to be taxed at your personal tax rate. Now an S Corp, you can give yourself a W2 and you actually have to pay yourself a salary as an employee. But for most of you are sole proprietors or LLCs, don't worry about, oh, I've got to give myself a paycheck. Everything in the business that's profit is going to be taxed at your personal tax rate. Because going directly onto your schedule C on your personal tax return. So don't get too worried and in the weeds on that. Figure out what you got to spend, what you got to pay yourself every single week for your personal expenses. Have that money coming out and that money that is like non negotiable, you have to have it to survive everything that's left in the business, that's what you get to play, quote unquote, play with and use to grow the business. So if that money is running low, guess what? We're going to, we're going to raise prices. We aren't going to grow or expand. We're not going to be able to afford another truck and another employee. We're going to have to focus on the existing customers and make it more profitable, raise prices and then as time goes on, you're going to get more cash in that account, grow the business and eventually you'll raise that weekly amount. So back in the day when I was just had a gust of long care like that was my main thing. We had the one location I started off with $500 a week and I just slowly moved that up as I my personal expenses went up because I was going to college at the time, I needed to pay for that. I need to pay for living expenses, my car, et cetera. So I just kept moving it up. I think I started at $300 a week on to 500, went to 800. By the time I hit a thousand, I had other businesses and I stopped. But basically that's what I kept doing is it kept moving up the amount that I was making personally auto moving the money over, across and then what was left in the business was the businesses. Whatever was coming to me was mine and that kept me very accountable at the beginning a lot. Okay, next question. How do you decide between paying cash or getting financed for anything business? Are there situations where even a 6 plus percent interest rate is worth paying because you can use the cash elsewhere to drum up more business? Great question. And I think a lot of times I get painted with the paintbrush, like oh, debt is bad. Like a lot of people think I'm the Dave Ramsey of the landscaping industry because like I talk about not getting debt and I kind of talked about Tigran and all the debt that he was going into. And you know, I appreciate that. However, I don't think that is a bad thing if it's used correctly. And I still remember when I was working as a personal trainer at Anytime Fitness and the current owner back in the day because he ended up selling it to me but at the time, the owner, I remember him talking to me. He's a young guy, he'd just come out of the military, owned like four or five gyms at the time. And, and I really looked up to him. He's kind of like my first quote, unquote boss. I was, I would have been like 15 or 16. I was a personal trainer there. And I remember him telling me, he's like, whenever there you can get money for less than 5% on a loan, you should take it no matter what. You should always take anything less than 5%. And it stuck with me because the reason I had always been like, man, how does he afford? He built like four or five gyms really quickly coming out of the military. And it's not like he had gobs of money, but literally he just leveraged himself to the point where like, hey, I know the business model, I know exactly how much money I need to start one, and I know exactly how much my payments are going to be. I know exactly how many members I need to buy have on board before I get become profitable. I know how long that takes me. Like he had everything down to a science and a system and so he could confidently go into debt. And the biggest thing I have against people going into debt is they do not have a plan, they do not have a system, they do not know their numbers, they have not been tracking their efficiency score, they do not know how efficient their labor is, they are not on P4P pay for performance, and their their labor expense varies like all over the place. That makes me very scared because now you're paying interest on a debt that again, you could put your family's assets like your home and your house into jeopardy if you aren't managing that debt correctly. Now, if I believe this is the bottom line, and I talked about this at last year's conference, which by the way, everyone should sign up for conference, it's going to be great. But last year at conference we talked about the return on investment. And when we look at your business as a money machine, your small business as a money machine, to where you put a dollar in and you get $2 out on the other side, how can you get your business to that point? We have a predictable outcome. I put a dollar into marketing, a dollar into new equipment, a dollar into hiring someone, and on the other side, I get a return on that money. The beautiful thing about small businesses, you can get 100% returns, you can get 200% returns on your money if you have a good system. Now the problem is if you don't have your good, good margins, if you don't know your numbers, if you are running unprofitable services and you're running a bunch of water wells, that is not drilling deep and making profit in the services that you're offering, if you're doing that, the problem is it's massively risky because if you're not profitable and now you have a 6%, 7%, 8% interest bearing loan, you've got big problems. And so the bottom line though is if you can confidently predict you're going to make 50, 60, 80, 100% return on the money you get from that loan, then yeah, you should go get a loan. You should spend that $40,000 instead of paying spending cash, you should go use that $40,000 to get a snow plowing truck. But guess what? You should know what your pricing is for snow plowing. You should know how profitable you're going to be. In my opinion, you should have sold jobs for snow and plowing before you go get $40,000 worth of debt. My biggest problem is people see other landscapers with this equipment and think that the equipment somehow leads to the contracts. No, no, no, no. You should get the contracts and then go get the equipment. And you should make sure that when you get that equipment, it's going, you have a dependable way. Okay, I know if I buy this equipment, I need 12 customers to make up for that. How am I going to solve customers? Well, I'm going to knock on doors, I'm going to spend money on this much on advertising, this much on equipment, this much on wages, and that's going to lead me to X amount more profit. That's what, that's why I'm very hesitant to tell people just go get loans. The story, the bottom line is I'm about to go millions of dollars in the debt to grow the franchise. That's the bottom line. We're building this big, you know, headquarters, trying to bring four offices under one building. I'm going to tons and tons of debt. And the bottom line is because I feel like I can beat out the five and a quarter percent interest rate that I'm getting on that debt, I believe that the money I'm spending is going to yield a higher return than five and a quarter percent. And at the end of the day, when you look at your business from a number standpoint and an ROI standpoint like cash on cash return standpoint, if you're looking at real estate, that's a term they use, you have to realize that your small business can be the most incredible money machine if you have predictable outcomes. And if you do, that's when debt is something that I would stand behind 100, 110%. So I'm not against debt. I do not believe everything needs to be paid with cash. I use credit cards every single day. I pay them off every single month. I don't carry a balance. But I'm just saying cash is not everything in your business. You can grow your business much faster using debt, but you better make sure you know you're going to be having a higher return on those dollars than the interest going out the door. And, and that's why I'm afraid with people that are just starting brand new with no systems, they're just like getting started and they're going to go, you know, get a bunch of debt. That makes me very afraid because they don't know what their customer acquisition cost is. They don't know what labor efficiency numbers they have. They don't know how much they have to spend on marketing to get the customers that they think they're going to get tomorrow. Are you looking to take your lawn care and landscaping business to the next level? If you are, you definitely want to want to come and attend Landscape Summit. It's an in person event this year, January 13th, 14th and 15th. This three day event will change your life, change your business and allow you to meet other landscapers just like yourself that are trying to grow their business. I look forward to seeing you there.