Podcast

Episode 347

Apr 9, 2021

Did line 7 or line 31 on your schedule C shock you a little? Allissa and Michael discuss how paying yourself will help you run your massage business.

Listen to "E347: Why You Should Pay Yourself" on Spreaker.
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EPISODE 347

Weekly Roundup

Discussion Topic

  • Why You Should Pay Yourself
  • Resource: Managing Cash Flow, part of our 2020 Mind Your Money series with ABMP

Quick Tips

  • Pay yourself

Sponsors


Transcript: 

Sponsor message:

This episode is sponsored by Acuity, our software of choice. Acuity is the scheduling assistant that makes it easy for both traditional businesses and virtual businesses to keep their calendar full. Acuity is the business suite that takes hours of work off your plate so you can focus on the fun of your massage business. From the moment a client books with you, Acuity is there to send booking confirmations with your own brand and messaging. Deliver text reminders, let clients reschedule, let them pay online so your days run smoother and faster as you get busier. You never have to say, "What time works for you?" Again. Clients can quickly review your real time availability and book their own appointments. You can get a special 45 day free offer when you sign up today at massagebusinessblueprint.com/acuity.

Michael Reynolds:

Hey, everyone. Welcome to the Massage Business Blueprint Podcast, where we help you attract more clients, make more money, and improve your quality of life. I'm Michael Reynolds.

Allissa Haines:

I'm Allissa Haines.

Michael Reynolds:

And we are your hosts. We're glad you're here as always. Allissa, what are you reading?

Allissa Haines:

What am I reading? So I am reading the third edition of Pre and Perinatal Massage Therapy by Carole Osborne, Michele Kolakowski, and David Lobenstine. And it's wonderful. It's wonderful and beautiful. And I don't even do much pregnancy massage anymore and I am just so deeply in love with this book. And yeah, I was invited to the launch party for this book, which was just like a Zoom last week, and it was just delightful, just wonderful people. And Carole and Michele and David talking about the book. And I had in preparation listened to, there's two episodes of the ABM Podcast that had the three of them on. And they are, those two episodes are, my most favorite ABM podcasts so far. And I don't even like interview episodes and I just loved it. And the way they spoke about the book and massage in general, not just prenatal massage, was very comforting and really, really hopeful. Everyone should go to the ABMP Podcast and listen to those two episodes. They are just wonderful and delightful.

Allissa Haines:

And a thing I didn't mention at the launch party that I want to make sure I mentioned now, I was so struck by the beauty of the inclusive language that each of the authors used in speaking about pregnant bodies and bodies receiving massage in general. And it was just lovely. So yeah, that's what I have to say about that.

Michael Reynolds:

[crosstalk 00:02:53].

Allissa Haines:

Yeah. And if you do prenatal massage or even complicated massage, people with complicated health conditions, the most useful information I have ever learned about massage for people with complicated health conditions has come from specialized classes, like the Oncology Massage Therapy with Tracy Walton, and the prenatal massage therapy information that I've received. This kind of information really translates to all of your work. Anyhow, it's beautiful. So that's what I have to say about that. Have you been reading anything, Michael?

Michael Reynolds:

I have, but nothing really jumped out at me as shareable for the episode today, so I'm going to pass and we'll just go with yours today. So thanks for sharing that.

Allissa Haines:

Okay. Who's our first sponsor?

Michael Reynolds:

Jojoba!

Allissa Haines:

And you know what? This is timely because jojoba is fantastic for prenatal massage because it is non-allergenic. I don't have to worry about some pregnant body on my table having some nut allergy or any other kind of allergy. It is so good for skin going through wackadoodle hormonal changes. It doesn't go rancid, so it's going to last forever on your shelf. You, my friends, can get 20% off the price of the product when you shop through our link at massagebusinessblueprint.com/jojoba.

Michael Reynolds:

Thanks, Jojoba. All right. You told me I was going to love today's topic and I do. So I'm ready.

Allissa Haines:

Yeah, you do. We are going to talk about why you need to pay yourself in your massage practice. And I really don't like to use the phrase "you need to". I try to not do that anymore. However, you really should pay yourself. So let me tell you how this topic came about. One, it's something we covered last year in our Mind Your Money 2020 series for ABMP. And I will put the link to the related column in our show notes today. But it came about more recently because in the last several months, many of us have had to do a lot of fiscal research and math when figuring out the kind of PUA we were entitled to, and grants, and applying for PPP loans, and that really led many of us to a whole new and different understanding of our Schedule C, and specifically of the Line 31 on our Schedule C, which is how, if you run a sole proprietorship, which most of us do, that is how you account for your business earnings and expenses and calculate what you need to pay tax on as income.

Allissa Haines:

And this is part of the federal return. So Line 31 is the net profit or loss from our business. And in very simple, basic terms, that is the amount of income that you pay tax on. And technically the amount that we, I'm going to put air quotes around this, took home. It is what is left as profit after all of our allowable business expenses. So a lot of people looked at that Line 31 for their, let's say, 2019 returns, and they were like, "$38,000! I didn't take home that much. Where did that money go?" Now, that tends to happen, there's not a real understanding, I don't want to say understanding, a realization, epiphany of how much you actually made. There tends to be a real gray area if you're not making structured regular owner's draws, which means you remove money from a business account and you pay it into your personal account.

Allissa Haines:

Now, this can happen if you're not using two separate accounts, if you're not using a business and a personal account, if you're just running all of your business money through your personal bank accounts, which by the way, it's not illegal, it's not against the law, it's not even necessarily bad bookkeeping, but it can lead to confusion about how much you've actually earned because all of your numbers get really muddled. It can also happen if you use your business account to make personal expenditures. So if I go grocery shopping and I use my business checking, and I think, "Oh, I'm just paying myself," I am in fact paying myself that amount and using it for groceries, but it's real muddy. It's not a real clear transaction of paying myself. It's an, "I bought something with my business money, but actually it's a personal thing."

Allissa Haines:

So some of that confusion, not using a business account, buying personal stuff through your business account, or just in general, not making a regular owner's draw, like a weekly or every other week or monthly, this can really lead to your money seemingly disappearing, you not realizing how much money you have actually put in your personal pocket. So another typical response on the tail end, on the opposite part of the spectrum here, is that people looked at that Line 31 and went, "I cannot believe I worked so hard that year and yet made so little money." And this is the result of, one, just not earning enough, and or two, putting a lot of your money back into the business. So either you didn't have enough gross, which your gross income is every penny you take in for the services and products you sell. So you didn't have enough gross, or you had plenty of gross, but just spent too much of it on business stuff like upgrading your table and new linens when you didn't really need them. Or maybe you did need them, but we'll talk about that in a second.

Allissa Haines:

So there was this real spectrum of reactions when people started to very closely examine their Line 31, and this is a thing that happens less to people who to prepare their own taxes. So we vehemently recommend that people use a tax preparer when they have a small business. You will miss out on a lot of potential deductions and changes in tax law year to year if you're doing it on your own and you're not super up on this. But sometimes the downside of having your taxes prepared, especially if you don't do a lot of the prep work for that tax meeting, if it's done through a bookkeeper, a lot of this can mean that you don't have a real clear awareness of what's going on with your business money. And very specifically, you don't have a real awareness of what is on Line 31 of your Schedule C.

Allissa Haines:

And another reason this can happen is if you are partnered, if you do a married filing jointly thing, and your partner has a decent income, if you're not really flipping page by page through your tax returns, you might not have a clear idea of how much you've earned and how much they've earned. It might be just more broad ideas, but because that money's all pooled, you don't necessarily have a clear idea, also, partly because you have not paid yourself a regular owner's draw. So there was a lot going on as people started to look at Line 31 and also at Line 7 of their Schedule C, which is the gross income. So the result here is people were shocked and surprised at how much they made and their confusion about where it went or how little they made, and why am I even running a business and thinking this can be a real job?

Allissa Haines:

So the good news is there is a solution to this confusion and this startling realization, and that solution is called cashflow management, which sounds boring, but actually translates into being able to pay yourself a living wage. So cashflow management, in my mind, and as we teach, is a flexible system for making decisions about your money. It's not necessarily a set of strict rules. It's not necessarily even a very strict budget. Cashflow management is thinking about your priorities and what you want your money to do, and you make those decisions before that money comes in. And cashflow management is a flexible way to adjust that plan as you go so it serves you and it serves your business. In order to talk more about cashflow management, we have to address one or two, I'm going to call them, BS metrics. I'm not going to swear in this episode, I hope. But one of the things I want to emphasize is that gross income is a total crap metric.

Allissa Haines:

So gross income, again, every penny that comes into your massage business for the services and or products that you provide. And a lot of people who like to teach business and marketing, really are like, "You can make $100,000 or more providing massage." You could, but if you have to spend $50,000 on your rent and all of your expenses to have an office in a high-end neighborhood to charge the highest prices, so that you only have $50,000 left after expenses, and then you have to pay taxes on that and you're only taking home $39,000 a year for your full-time massage practice, $100,000 doesn't really mean jack, does it? So gross income is a crap metric, and it only matters in relation to how much you're spending to keep your business going and what the resulting net income is. So don't get too hung up on gross income, because a lot can be done to increase your net without having to increase your gross.

Allissa Haines:

Now, let's talk about an owner's draw, which is intentionally paying yourself. So a lot of us didn't have bookkeeping and cashflow management skills when we started our business. We would take money in for providing massage, write checks to pay all of our businesses bills, and then whatever was left over we'd pay ourselves. And if we were smart, we would put a certain percentage aside to pay our quarterly taxes or pay our end of year taxes. But no one really taught us how to be intentional about paying ourselves, which is so crap, because there's so much in massage school about being intentional and your intent when you touch a body and your intent when you communicate with a client. I can't believe nobody was ever like, "Hey, you need to apply that same theory of intent to your finances." But we really do need to pay ourselves, and intentionally. Not as an afterthought. Not giving ourselves the scraps of what is left. We need to prepare the darn meal.

Allissa Haines:

So we need to pay ourselves. We need to provide food and shelter for ourselves. We need to save for our retirement. And moreover, we need the fulfillment, we need that tangible result of all of our hard work. Now, even if you're not super motivated by money, paying yourself provides a visual and, I want to say, emotional reward for all of your hard work. So unless and until you're taking an owner's draw, you're not going to see what's going on and how this business can support you. And you can't make educated decisions about your future as a person and also the future of your business if you're not drawing an income and actually seeing the benefits of your work and actually being able to spend the benefits of your work. So if you are not taking an owner's draw from your business, if you haven't, if it's super irregular, if it's an afterthought for you, maybe step back and consider that right now, you have a hobby.

Allissa Haines:

You don't have a business, you have a hobby, because until your business, until your massage practice is actually paying you, it's not a job. It's a hobby for funsies. And this is okay. There are many massage therapists who intentionally run their business not to draw an income because they don't need to, or whatever. But to be of service, the business pays for itself, maybe gives them a little bit of pocket money, and that's it. And that's okay. But if your massage business is a hobby and you don't need to draw an income, make that the intention and make your decisions accordingly. If you need an income, then you need to run a business and pay yourself intentionally. And also, you need an income to feel motivated. There is a super high burnout rate in our industry. And, of course, you're burned out after five years of working full-time in your practice and taking home $300 a week. That's not a living wage. If you can do better as a manager at a retail shop, at the mall or the Orange Julius stand, you're not paying yourself a legit living wage.

Allissa Haines:

Why did you even get into this? Your business is a job and if you wouldn't work for minimum wage or less for an employer, why would you do that for yourself? Don't be a crappy boss. Be your best boss ever, and figure out your business finances so that you can actually pay yourself. And now the figure out part is coming. So how do I pay myself? I would encourage people to pay themselves weekly or every other week. I know lots of people pay themselves monthly. And if that works for you, that's okay. But I have found that for most of us monthly is not frequently enough to feel that motivating reward. I have been an employee in jobs where I was paid weekly and every other week and monthly, and I can tell you that monthly, by the end of the month, if I was paid at the first of the month, by the end of the month, the third week, I hadn't seen any new money coming in and I was less happy at my job, because I hadn't gotten that regular, I'm supporting, myself mental reward.

Allissa Haines:

So I really encourage people to pay themselves at least twice a month. Weekly is even better for some of us. I actually switched to paying myself weekly and it has made a huge difference for me mentally, and as I process my bills and handle my money. So how do you figure out what to pay yourself? Again, I'm going to link to the ABMP column. We actually have a video demonstrating two different ways, and here are the two different ways, a flat rate or a percentage of your gross each week. So the flat rate means that you pay yourself a set amount, like let's say $500 a week. So you have to look at several months of data of your income and expenses to figure out a flat rate that works for you. Because if you have a slow week, in theory, you might not have enough in your bank account to pay yourself that $500. But if you've had busier weeks prior, you will have the extra sitting there.

Allissa Haines:

So you have to look at your own numbers and practice. Decide a flat rate, pay yourself that for a couple of weeks, see if you've got a ton left over or if you're just barely squeaking by, and make some adjustments as you go. There is also the percentage system, which is to factor a percentage of the gross income that you take in that, the money that you take in every week providing massage and products. This also, you have to go back and look at your average income over the course of a couple of months. You have to look at your average expenses over the course of a couple of months and figure out what percentage works. Now, if you start doing this math and there isn't enough, I'm air quoting, "left over" to pay yourself a living wage, now we've hit the core of the issue. There are a lot of people who are like, "But I can't afford to pay myself. There's just not enough money." If you can't afford to pay yourself, it's a hobby. That's okay, but make that decision.

Allissa Haines:

If you can't afford to pay yourself, if there is not enough money coming into your business to pay yourself, you could probably use an efficiency update. You may need to make some decisions to either increase the money coming into your massage practice, raise your prices, work more, share your office with somebody who's going to help cover the expenses, or you need to lower your expenses. And we have roughly 300 plus podcasts on how to make more money and or lower your expenses, so go back in the archives, you'll find stuff. But if you're not making a living wage, you're not running a business. So think about what you need to do to make that happen and start paying yourself regularly. Even if you start really, really slow and if you haven't been intentionally paying yourself, if all you do is start by paying yourself $100 a week for the next 12 weeks, while you figure this out, it's still $100 more intentional than you were paying yourself before.

Allissa Haines:

Now you're learning that your business is or is not viable as it's running now, and now you have the information to base any changes upon. And that is the first important step. Again, I'm going to link to our column, the Managing Cashflow Column, that we wrote. There's an accompanying video. It's available for everyone to see. And that is what I have to say about that. What do you think, Michael?

Michael Reynolds:

So I have a thought, but before that, as good as this episode was, I want to say my favorite part is your reference to Orange Julius at the mall, because my childhood just came flooding back with happy memories of me as a kid, going to Orange Julius at the mall with my mom. And I was so excited every time we went. So, that was my favorite part of this entire episode.

Allissa Haines:

Well, I'm glad I could give you some nostalgia.

Michael Reynolds:

Orange Julius. I think they still exist.

Allissa Haines:

I believe they do.

Michael Reynolds:

Yeah. I want one now. So anyway, yes, if I had a mic, I would drop it, but my mic is attached to my headset, so I can't really drop it, but I love it. I want to add, one thing that could help some people is to actually set up a payroll system. This is probably overkill for most of us or many of us, but if you find it difficult to do that transfer money thing every week or every two weeks, if it just feels like it's something you're just not able to get on your list of things to do, it doesn't really feel natural, a thing that can add forced discipline is to actually set up a payroll system. Go to Gusto. Gusto is my favorite payroll system. So you can set that up and you can say, "Okay, my pay schedule is every week," and Gusto will email you and say, "Hey, time to run payroll," and you go run payroll and you click the buttons and you actually run payroll with direct deposit.

Michael Reynolds:

And it feels very real. It makes paying yourself feel very tangible and real, like you are working as a real employee at a job getting a paycheck. So that may help some people. If you struggle with fitting it in the schedule to pay yourself, that might be a way to force it, in a good way, a little bit.

Allissa Haines:

Absolutely.

Michael Reynolds:

Yeah.

Allissa Haines:

I don't love a lot of automation. I like to manage the money. I like to have a very clear idea of exactly where it's going and I like to move it there. But that's not for everybody, and I respect that. And I do want to reemphasize that, even if you start very small, if you haven't been intentionally paying yourself and you want to start doing that, again, if you start every Monday morning looking at the past week's numbers and paying yourself 10% of your gross or paying yourself a flat $100, by paying yourself, I mean, writing yourself a check and depositing it into your personal bank account, or doing an electronic transfer from your business account to your personal account, it will feel very good. And you will establish the routine without overdrawing your checking account, your business checking account. You will get that routine in place.

Allissa Haines:

And, again, we have a video that really demonstrates how to work through each of these methods, flat or percentage. I have found it to be really, really valuable for me. It took me years to grasp this concept. And even still, it wasn't until a year or two ago, just pre-pandemic, six months pre-pandemic, where I started being much more structured weekly. And Michael and I have talked about the budgeting applicant, You Need A Budget, that we both really, really love. I've done some demos on how I use that in my massage practice. If you're interested in that, let me know. And I love talking about this, so I'm going to stop because I could go on forever. If you have questions related to this or really anything, email them to us at podcast@massagebusinessblueprint.com, because we love to geek out about business money. So send us your questions, your comments. Tell me if I'm totally wrong. Tell me if you're completely stymied and don't know what to do next. I'd love to hear your issues. And that's all I have to say. I promise I'm done.

Michael Reynolds:

Yeah, this is so important. Thank you. All right. Hey, speaking of where you can find more resources. You can find some like this at ABMP.

Allissa Haines:

Darn right, you can.

Michael Reynolds:

[crosstalk 00:25:12].

Allissa Haines:

They say they're proud to sponsor the Massage Business Blueprint Podcast, and we appreciate that. CE courses you'll love are available for purchase or included free with membership in the ABMP Education Center, ABMP.com/CE. You can explore hands-on techniques, complete ethic requirements, discover trending courses like Addressing Health Disparities In Communities of Color with Wellness Approaches with Dr. Nicola Finley. All ABMP memberships include 200 plus video based on-demand CE classes. They have got a great new series of CE Socials, which are live events where you can connect and engage with your massage community with experts in the field and with ABMP in general as you learn and enjoy continuing education. You can join us, and by us, I mean, me and Michael, in a virtual classroom to interact and learn valuable new tools for your practice.

Allissa Haines:

We are doing a CE Social for them on Wednesday, April 28th, 2021. It is at 10:00 a.m. Mountain Time. It is called A Website That Works. It is one hour of CE credit, and you can go and learn more about that at AMBP.com/CE-socials. Is it D? Is it dash or is it hyphen? I don't know. The link's in the show notes, and you can just Google "ABMP CE Socials", which is what I did, and came up with that page.

Michael Reynolds:

I think technically it's hyphen, but everyone says dash, and it's the same thing.

Allissa Haines:

Yeah. Okay, well, that works. But you can also just go to the link in our podcast notes. Yeah, it's awesome. And the CE Socials are free for ABMP members. They're 15 bucks for non-members. So I believe it's worth your time for an hour of CE credit. Also, Michael and I are enchanting, and we've recorded the class, but then we will be live in the chat. So that'll be really, really fun. And you should totally check it out. ABMP.com.

Michael Reynolds:

Yay! All right.

Allissa Haines:

Any quick tips today, Michael?

Michael Reynolds:

No, I'm just enjoying the ride today. So go for it.

Allissa Haines:

Okay. Ready? Here's my quick tip. Pay yourself.

Michael Reynolds:

Oh, I see what you did there.

Allissa Haines:

See what I did there?

Michael Reynolds:

I see what you did there.

Allissa Haines:

Yeah. This was a quick episode, because y'all have been hanging with us for some long episodes and you deserve a bit of a rest.

Michael Reynolds:

I will also endorse pay yourself as a quick tip. So thank you for that. All right. We good?

Allissa Haines:

We're good, man. Bring it home.

Michael Reynolds:

All right. Awesome. Hey, everyone. As always, we're glad you joined us, and I want to also add, if you would like to talk more about stuff like this, our premium community online is where we do a deep dive into this stuff all the time. So office hours is a really good way to bring up questions and challenges and work through issues, things like paying yourself, for example, or things like money management in your massage practice.

Allissa Haines:

And an office hour is when Michael and or I are hanging out in a Zoom and you can pop in and pop out and ask your business related questions. And that's what an office hour is.

Michael Reynolds:

Exactly. It is that thing. And those are available to our community members. So if you want to learn more, if you're not a member yet and you've been on the fence and hanging around and saying, "Should I, or shouldn't I join?" Spoiler alert, you probably should think about it. It's 30 days free. You can try it out and see if you like it. MassageBusinessBlueprint.com, is where you'll find us. So thanks again for joining us. Have a great day. We'll see you next time.

Allissa Haines:

Bye.

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