Ep 419 - How to Pay Yourself in Your Massage Business:"Business or Pressure"with Allissa Haines

0:00:00.0 Speaker 1: HobaCare Jojoba is 100% pure, high-quality jojoba and it's ideal for massage and body work professionals. The closest product to the natural sebum our skin produces, HobaCare provides a deeply nourishing massage medium that will not clog pores. HobaCare is non-allergenic, so you can use it on every client and not worry about allergic reactions. HobaCare is shelf-stable and it will not stain your natural fiber sheets, making it an excellent choice for professional use and saving you money. Hint, you won't have to replace your linen so often. With HobaCare jojoba, you can offer your clients a superior experience that benefits both skin health and overall wellbeing. Our listeners can receive 20% off their order with code ABMP. Learn more at HobaCare.com. That's HOBACARE.com.

[music]

0:01:15.0 S1: Welcome to Business or Pressure, taking the pain out of massage business with me, Alissa Haines. This is your no-nonsense guide to building a happy, sustainable massage therapy business. It is our mission to make sure that every massage therapist and body worker has the tools to make a living wage in a thriving business. So let's jump in. We are continuing our conversations, our learning about money. And today we're tackling cash flow, which is just a fancy way of saying, what are we gonna do with the money in our business? We work as massage therapists, probably because we love it. And at the same time, we need to make money because we like to eat and put gas in the car and keep the lights on. But if you were not born a natural business owner, you probably have questions about the actual take home money part of business finances. And we need to get real about paying ourselves in a massage business. And that starts with cash flow management, which is a little bit nerdy, but kind of awesome.

0:02:15.9 S1: Cash flow management is just a flexible system for making decisions about your money. It's not a set of rules. It's not a strict budget. Good cash flow management is about thinking through your priorities and what you want your money to do before it comes in. And then you can adjust to the plan as you go so that your business and your money continues to serve you well. But to embrace good cash flow management, we have to step back a little bit and slay a big money myth. Here's the myth, that gross income matters. I am sure you've seen a ton of resources that promise to teach you how to make six figures, how to make $100,000 a year or more as a massage therapist. And while some of these resources have great ideas, the advertising is super scammy because that $100,000 is referring to gross income. Gross income is the total amount that your business takes in doing massage. But it is a terrible metric to count on because it doesn't consider all everything you have to pay to run that business. Making $100,000 a year gross income as a massage therapist is just lovely.

0:03:28.8 S1: But if you're in an area with super high rent, if you're paying a lot of money for advertising, if you're paying a lot of money buying only the finest sheets and massage products, you're spending all your money on expenses and you're not taking enough home. The number that really matters in a massage business and any business is the owner's draw. It's the wage that you pay yourself. So let's talk about that. In sole proprietorships and in LLCs that file taxes with a Schedule C, which means you're filing your business taxes right along with your personal return, the amount of money that you pay yourself is called an owner's draw. If your business is organized as a C Corp or you're filing taxes as an S Corp, it's a little bit different, but the same ideas still apply. So keep listening. So many business owners are not intentional about their take-home pay. They take in money for a massage, they pay the bills, and then they pay themselves whatever is left over.

0:04:30.6 S1: You should not be an afterthought. You should not be left over in your massage business. Intention is just as important in business finances as it is in hands-on work. How do I pay myself is one of the more common business money questions that I hear, and the answer can be super complex and can be super varied, but we're gonna keep it as simple as we can. And the answer always begins with intention. Your owner's draw should not be the remainder or the leftover. It should be a well-thought-out intention. You need to pay yourself. You need to eat. You need the fulfillment of seeing the tangible result of all of your hard work. And unless and until you take an owner's draw, you cannot make educated decisions about your future and the future of your business. And a reminder, we covered this in my very first episode of this podcast.

0:05:21.4 S1: If you are not taking a draw from your business, you don't have a business, you have a hobby. Hobbies are great, that's totally okay, as long as it's your intention. Now before you email me with the, but what about this? Yes, of course. There will be a few weeks or a few months when you open your business, and at different times here and there where you do not pay yourself. But this should be very short term, and again, intentional. So how do we do this? There are a few ways to decide what your owner's draw should be, and how to manage your cash flow. In general, I advocate for paying myself first, and then setting aside the money for taxes next, and then paying bills last. If you haven't been doing this, it seems impossible, like, how could I possibly pay the bills last? I won't pay all the bills.

0:06:11.7 S1: But we're gonna talk through a few ways to get started, and it really is possible, I promise you. So first, you've gotta look at the last few months of income and expenses. We talked about gathering your gross and net income in the last episode of this podcast, but you've gotta look at that. The last few months on a monthly basis, how much did you take in from providing massage, and how much did you spend on expenses not including your owner's draw? And then you need to consider your personal budget and style.

0:06:38.6 S1: Are you okay paying yourself an amount that varies from week to week, or would you really do well paying yourself a consistent amount week to week? Do you need to pay yourself weekly? Are you okay with every other week? Are you okay with monthly? Think about what fits your personal life and style, and you can make some decisions there. I have found that I do much better paying myself weekly in a consistent amount, even if that amount is a little bit less than I could be paying myself. I budget in my personal life better if I'm paying myself week to week as opposed to one lump sum once a month. You gotta do what works for you, and you might have to experiment a little bit to find that out. So if you're comfortable with an owner's draw that varies from week to week or month to month, you can configure your pay as a percentage of your gross income or as a certain flat dollar amount for every massage that you perform.

0:07:36.0 S1: If you prefer a consistent amount, you can pay yourself that same amount each pay period and set aside the extra funds on the weeks when your gross income is higher to cover the weeks when your gross income is lower. You're kind of giving yourself a set salary regardless of the number of hours you work per week. So what's gonna work for you, a varying amount or a consistent amount, and how frequently? And you're gonna set up that payment schedule. It really helps to manage your money on a regular schedule as a ritualized task. Schedule it at the same time every week or twice a month. I think twice a month is the least I would go. I think if you're only looking at your business money monthly, it's real easy to go off track.

0:08:20.8 S1: It's real easy to have a very slow month and not realize it till the third week of the month when you can't do anything about it. But every week, every other week, you're gonna sit down. You're gonna take a look at how much money you have taken in since the last time you paid yourself. That's your gross income. And then you're gonna pay yourself either that determined percentage of the total gross or a certain amount for each massage performed or flat pay for that pay period. And then you move that money that you're paying yourself from your business account into your personal account. Separate that money. And now we need to take a little sidebar for taxes.

0:09:00.0 S1: There's two ways you can do this. You can move what you're paying yourself from your business account to your personal account. And then within your personal accounts, you can pull some of that out for taxes and set it aside into a tax savings account. Or you can do that within your business. You pay yourself your wage, your regular owner's draw. And then from your business account, you set aside another chunk of money that goes into your business savings for taxes. When you're a Schedule C filer, when you file your business taxes within your personal return via a Schedule C, that tax money that you're paying is personal taxes. So you can put it in a personal savings account or you can put it in another business savings account attached to your business checking. It doesn't really matter, but you've got to set aside a portion of your gross income for taxes. Your accountant or your tax preparer, but you've got to set it aside.

0:09:54.6 S1: Do not skip this step. Don't think, oh, I'll just set aside more for taxes next week. Do it immediately before you're tempted to spend it on something else or before you forget that you need to save it. Years back I read, and this sentiment has helped me greatly, to think of this as the government's money right away. It's the government's money and you're just holding it for them. And if you don't have it when they want it, that's a big problem. All right, so you've paid yourself, you've set aside some for taxes, and the remaining amount of your gross income is what you have to spend on operating expenses, paying the bills, buying the things you need to run your business. And this is a little bit mind blowing.

0:10:37.8 S1: It takes some time to figure out exactly what proportions of paying yourself and paying your taxes and paying your expenses is gonna work for your business. You might find after paying yourself and setting aside tax money that you don't have enough to pay your bills. Okay, now you've got some choices to make. You can lower your owner's draw, you can lower your expenses, or you can earn more money. And part of what I love about paying yourself first is that it forces you to be brutal about expenses and it forces you to acknowledge when you're not working enough or when you're not putting in the legwork to build your client base. If you are not dependent on income from your business, it can be really tempting to just decrease your owner's draw. But again, are you running a business or are you funding a hobby? There's no wrong answer, but you need to be clear on your purpose.

0:11:33.9 S1: So seeing these numbers in action can help motivate you to market your business and get more clients. It is super easy to blow off the business building activities when you're not fully cognizant of the financial impact and goals. When I know that I want to need to pay myself a certain base amount, I know that that money either has to come from decreasing expenses or increasing my client numbers. That money does not and should not come from what I'm paying myself. Once you get the hang of this, you can also really focus on being your own best boss ever. And that means things like planning for sick days, planning for vacation, contributing to retirement.

0:12:15.4 S1: All the benefits that a regular employer would give you, think about giving them to yourself. See where you can squeeze out another 5% or consider how much more you would need to earn to make that happen. But however you choose to pay yourself, make it intentional and make it regular 'cause that is the bottom line for running a sustainable massage business, paying yourself and keeping it intentional. Today's high five is super relevant and I'm giving it to my budgeting software, You Need a Budget, YNAB. I've talked about it before. I do not make any money off of recommending it to anybody.

0:12:56.4 S1: It is a web-based budgeting software that takes the pain, takes the sting out of budgeting because it just lets you plan in a really flexible way what you want to do with the money that comes in. In my YNAB program, I have multiple budgets. I have my business budget. I have a personal budget. You could just use it for business. You could just use it for personal. There's a little bit of a learning curve, but I think it's 100% worth it. If you need to start some kind of system, I strongly encourage you to check out You Need a Budget. If you have questions about running your business or an idea for an episode, I wanna hear from you. You can email me at businessorpressure@abmp.com. You can also find me building websites and playing with my community of massage therapists over at deepbreathdigital.com. Make sure you're subscribed to ABMP's podcast so you don't miss a beat.

0:13:47.9 S1: There is so much to learn about building and maintaining a massage business. We're gonna cover the business and marketing side, the communication skills, all the things to help you be successful. I will meet you right here for the next episode. I can't wait.