As a food vendor, you may assume you should put everything you make back into the business. Not so. The first thing you should do with your money is pay yourself, first. Many food business owners who bootstrapped their companies feel that paying themselves is a luxury; however, we feel (and will show you why) that it is a necessity to pay yourself first for the success of your food business.
If you’ve got a nice cushion of savings, you may not need a salary right now to pay your bills. But that could change, so it’s best to prepare for the day when your funds run out. Getting into the habit of paying yourself, even just a little bit, will give you money for personal expenses when things get tight or sales slow down. If your food business happens to fail one day, you would have gotten something for your efforts by paying yourself and saving money for that rainy day.
Giving yourself a salary can have tax benefits for certain business structures, as it will reduce your company’s profit. Talk to an accountant to find out what benefits your tax type (LLC, partnership, corporation) has with your salary.
Other benefits to paying yourself include:
You can save money for future business efforts or for personal use
You may work harder to increase revenues and thus your income
Investors (if you have them) see you are committed to growing your company
Build in Your Salary
Plan your salary from the beginning. When you set up your budget and food business plan, include at least a small salary (weekly, bi-weekly or monthly) for yourself. If you’re going to be seeking financing, having your salary built in is key, as it will increase the amount you ask for from investors. In this case, determine how much you need to live, as well as, what you’re worth.
If you’re bootstrapping, start by paying yourself a modest salary, even if it’s just a few hundred dollars a week. This can increase as your profits grow. You can also pay yourself through employee benefits such as health insurance or 401K investment.
When to Not Pay Yourself
There are a few instances when you can delay paying yourself:
You don’t have enough to pay for your employees’ paychecks or pay bills to your suppliers. Delay paying yourself until these expenses are covered.
You have significant up-front expenses. Then, you can delay your compensation until all expenses are covered with money brought in from food sales.
The Bottom Line
You’ve achieved something great by starting a food business. As a culinary entrepreneur, you’re willing to take risks to grow your mobile food business. You deserve to be paid, just like any of your employees. Invest in yourself just like you do your food business!