Kelly challenges the conventional wisdom of minimal owner's draw and compensation for tax purposes.
She urges entrepreneurs to pay themselves a salary that covers their needs, savings, and desired lifestyle, emphasizing the link between financial security and mental health. Kelly uncovers the pitfalls of underpaying yourself, from jeopardizing your family's well-being during tough times to diminishing your negotiating power when selling your business and how it’s important to accurately represent your company's true profits to potential buyers.
Also in this episode:
- Mental And Physical Health: Underpaying yourself can lead to financial stress and negatively impact your mental and physical health, which in turn can affect your ability to lead your business effectively.
- Preparing For Business Challenges: Relying solely on dividends when your business underperforms can lead to financial instability at home.
- Negotiating Power And Business Valuation: Potential buyers will assess what it would cost to replace you and your role within the company, which should be a reasonable compensation benchmark.
- Understanding True Profitability: Underrepresenting your compensation can distort the true profitability of your company, making it difficult to make informed decisions and strategic changes.
- Clear Vision For Growth: Paying yourself what you're worth helps you see your business's performance clearly, allowing you to make necessary changes and decisions to drive growth.
- Tax Considerations: It's important to strike a balance between minimizing taxes and maintaining financial stability.
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