Paying Yourself on Day One

Welcome back! Please read the following disclaimer.

Everything you read on this website is the personal opinion of John Stephens, the author. It may not reflect the thoughts, ideas, opinions, or belief systems of GAMA, any member of the GAMA staff, or any other member of the GAMA Board of Directors. It may not reflect the opinions of Mr. Stephens family, his business partners, or the government and flag he swears allegiance to.

On with the show!

I swore to myself I would write at least 52 posts on this website this year, and frankly, I don't always have ideas, so I will be using this website to write about topics that I've seen discussed in Facebook groups. One of the Facebook groups that I love following is "Opening a Tabletop Game Store." This group gives me hope, because I want everyone to come into this industry with their eyes wide open, and an understanding that this passion project is actual hard work. Recently a Facebook user asked about building the budget for their loan applications, and specifically about whether or not that budget should include paying themselves in the first year.

Short post.

Yes. Pay yourself, from day one.

That's it, we're done with this post, right? No? You want an understanding of why?

Let's start with just some opinions. If you pay yourself on day one, you have a better understanding of what labor costs. Even if you pay yourself poorly, like minimum wage poorly, you're paying yourself and understand what paying employees will be with. As your revenue grows, you can give yourself raises, and you can hire more people, and if you hire the right people you can make more money and give yourself more money.

Second opinion. Ramen is not food. It was fine when you were writing a term paper at 3:00 AM that was due in five hours and you only had a hot plate and a microwave to choose from, but you're (presumably) a darned adult now, so you should eat like one. You should be able to enjoy an evening out, a movie, a nice dinner, or a vacation.

Third opinion. Most of us come to this industry from somewhere we made a lot more money (I managed night clubs, and was the Director of Sales and Marketing for a hotel). Do you know why that is? It's because if you're smart enough to make money doing this, you're smart enough to make more money doing just about anything else. So, you came from a place where you made more money to this industry to make zero money? You took a loan, maybe you risked your house, your nest egg, your retirement plan, to follow your dream. Do you want to not pay yourself while you do that? Do you want to risk your house as backing for a business loan and eat your personal savings account because you're paying yourself nothing?

That just feels like a terrible plan to me.

So those are some opinions on why you should pay yourself, but let's also talk about a factual reason you should pay yourself.

According to Psychology Today, the number two reason for divorce is financial disagreements. Chances are good that (hopefully) you discussed the decision to leave your good job and open a game store with your spouse. You've done the math and your spouse makes a salary that can support you, your family, and your lifestyle, while you build this business.

This conversation gets a little easier if you say "the loan calls for me to make this much money in year one, and the loan plan pays me that salary." You might still be giving up 50% or more of your previous income, but at least you're not giving up 100%, and you're making the effort on day one to understand that change.

Let's talk history. Back in ye olden days, with a small store, and much smaller sales, I lived with my folks (also, let's be honest, hanging with dad after work brought me a ton of joy). The Broomfield/Westminster area is expensive, which makes it a great place for a store (lots of disposable income), but also a tough place to live as a single dude with a new store and little income, so make sacrifices when you open your new store, but have a plan for when those sacrifices end, and what things look like in three years, five years, and ten years.

It's great to make those sacrifices in the early days. It's even better to have an idea of when they end, and an exit plan if that first plan doesn't come to fruition.

So I say make sure your loan can pay you for the first year, and if your store can't pay you in the second year, figure out next steps.

If you want to vehemently disagree with me and tell me I'm wrong, it's your right to do so, but to do so here you have to sign up for a free account! After you sign up for that free account you'll also receive an email telling you I've been wrong again so you can come correct me.