You wouldn’t agree to work for somebody else if they weren’t going to pay you, so why would you not pay yourself when running your own business? The logic is undeniable, but it seems many women business owners don’t pay themselves — even once the business is successful — and nor do they develop adequate retirement and exit plans.
We’re increasingly seeing women launching their own businesses, ranging from home-based artisanal products right through the spectrum to sophisticated services and cutting-edge tech companies.
But the growing number of women entering the sector (almost double over the past 20 years) means a growing number of women who are not building the best strategies to get value out of their businesses — both while they are running them, and after they retire or sell them, says Lindzi Caputo, wealth management manager at financial services firm HLB Mann Judd.
“It is encouraging to see a growing number of women setting up on their own, however it is concerning that female entrepreneurs tend pay themselves less than their male counterparts, and to contribute less to their superannuation,” Ms Caputo says.
She cited research showing that women business owners typically have lower weekly income than their male counterparts, with Australian Bureau of Statistics data revealing that women who operate unincorporated businesses have an average weekly cash income of $522 while for men it is $831, and for incorporated business owners it was $998 for women and $1,451 for men.
And that disparity extends to future planning, with only 45% of women business owners paying themselves superannuation, leading to their superannuation balances being around 30% lower than both women employees and self-employed men.
“In the early years, women business owners may be so focused on growing they don’t really think about paying themselves,” Ms Caputo says. “Later, the wealth in the business is locked away in the business.”
Women should not put themselves last in running their businesses, she says.
“Treat yourself as being important. Treat yourself as being worth a salary — or a dividend, if that’s more appropriate depending on your tax structure.”
Likewise with superannuation and succession or exit planning, the best advice is ‘the sooner the better’.
“We’re encouraging women business owners to take the time out to plan and put the strategies in early on,” Ms Caputo says.
Part of that encouragement takes the form of the company’s ‘mysoundingboard’ initiative for businesswomen, which is designed to be a combination of strategy incubator, mentor and peer connector, with a series of intensive programs and open events.
Overseen by HLB Mann Judd partner Mariana von-Lucken, the program allows the small number of ‘soundees’ — as Ms Caputo affectionately calls them – to develop their knowledge across a range of business topics, from key financials and accounting to increasing efficiency, building a saleable business and planning for personal wealth.
And it’s not just the knowledge building and networking (worthwhile as they are) but also the chance to sound out the group on your own goals and plans. Membership is limited for the program to just 12 women, but the related events have more access and the organisers are looking at the potential for day programs that would be open to people to come and listen to experts. You can find more information about mysoundingboard here.
In the meantime, Ms Caputo has four golden rules to help you start thinking along better lines for your own business.
Value your efforts for what they are worth
It can be hard to put a price on your time and services, but it’s important not to sell yourself short. Are you giving too much away for free?Be prepared to charge people what you think you are worth. No business will succeed in the long-term by undervaluing its goods and services.
Pay yourself a salary
Treat yourself as an employee and pay yourself a salary. It might not be a big or even a fair salary to start with, but it provides a discipline for the future, when the business is better established.
Make superannuation contributions
Superannuation is a good long term investment due to its tax effectiveness. Make a habit of ensuring regular contributions are made to your superannuation account – and don’t forget you can receive a deduction in your business or in your own name, depending on your business structure.
Keep business and personal finances separate
A common mistake is to pay for business expenses from a personal account and vice versa, which can lead to all sort of problems down the line. Think professionally and set things up properly at the beginning. Establish a separate bank account for the business, and a credit card used solely for business purposes. This makes it possible to keep track of cashflow – the lifeblood of small business.
