I have been an entrepreneur for several years. It took me about 10 years to figure out the game to get to the point where I was successful enough to employ others full time. I built a decent sized business with dozens of employees and contractors. All the money it made, I re-invested to grow the company. Then one day, I got very very ill and I had to shut down the operations of my business. I had collected $0 from this revenue generating business and had I collected a pay check, it would have paid me over $1 million dollars! You read that right, I’d be a millionaire right now! However because I never saved for a rainy day and I re-invested ALL the profits back into the company, I am now severely in debt and still recovering years later from getting ill. The good thing about my knowledge and experience is that it will allow me to replicate my success and put me where I was before I got ill with in a couple years when I go back out and do it again.
The take away:
Pay yourself, don’t re-invest all your businesses profits back into the company.
My new rule of thumb:
Pay yourself 50% of your businesses profits until your business is making millions a year in annual profit (provided you have no other business partners or investors).