How Much Should You Pay Yourself

When I started my bounce house rental company, I never paid myself for the first three years.  All of the money I made, I put back into the business.  This worked out great for me when starting out because I didn’t need the extra money for my monthly bills.  I was starting this venture as a side hustle, and I wanted it to grow as fast as possible.  So, every dollar I made, I reinvested it back into the business by purchasing new bounce houses, blowers, stakes, trailers, dollies, etc.

At some point, a few years after starting this side hustle, I started to get worn out.  I was working all week at my day job, in corporate America, and was working all weekend setting up and cleaning bounce houses.  All of this to just reinvest everything back into my side hustle.  I was missing out on my kids after school programs, sport events, and family time in the evenings and weekends.  I started to second guess my decision on why I even wanted a side hustle to begin with.

After three years of this, I decided it was time for a change.  I picked up the book, Profit First by Mike Michalowicz.  That was an amazing book that really changed my way of thinking. I quickly realized that I was wrong about my theory of, “put all the money back into the business”.  

While I still don't follow everything in the book, step-by-step, I do use his teachings to guide me through the process of paying myself first.  In the book, Mike talks about setting up multiple bank accounts to keep your money separated.  This is essentially the old envelope strategy of budgeting where you would keep an envelope for bills, an envelope for Christmas, an envelope for groceries, and so on.  This was an eye-opening experience for me to decide that I really do need to start paying myself first.

After starting my bounce house rental business in 2017, I really wish I could go back in time and start paying myself sooner.  From day one, I would have implemented a 30% budget for labor on all of my rental orders.  This 30% is large enough so I can ensure I'm not wasting my time working for nothing, while also small enough that I still have enough money leftover to continue to grow my business. 

Here’s what I mean:

If I rent a square bounce house for $200 for the weekend, $60 of that would come to me for my “labor budget”.

You could keep that $60 for yourself, if you did all the work alone.  Or, you can choose to hire your neighbor, friend, cousin, etc., and give them a portion of that $60.  Let’s say you decide to give your neighbor $20 to jump in a truck and help you pick up the bounce house and unload into your garage (an hour worth of work).  Now, you can keep $40, you pay your neighbor $20, and you split the work effort to make this all happen.

Now let’s say you have four bounce houses that you rent out over the weekend for $200 each.  Your total for the weekend would be $800.  You may need to hire someone to help you with some of the work. But, maybe you decide not to pay anyone this time. 

In this example, you're going to pay yourself 30% of the $800, or $240. That’s not too bad for some extra weekend cash.  That also gives you the other 70% to be put back into your business ($560).  That 70% will be used for taxes, marketing material, new equipment, expanding the business, etc.

I really wish I would have implemented a 30%, "pay yourself" rate, when I was first starting out.  Now, many years later, I still try to stick with 30% labor rates with my bounce house rental business.  I pay myself a portion of that amount; howerver, I now have employees that get a big piece of that pie.

Always remember to pay yourself.  After all, it’s not just a financial decision; it’s a commitment to your future and the fuel you’ll need for continued success.