If times are tight, your employee salaries and benefits shouldn’t be the only ones to take a cut.
It’s never a good option, but cutting your own pay as an entrepreneur is the right thing to do if you have to start dipping into payroll in order to well, make payroll. Slashing your own salary sends a signal to workers that “we’re all in this together” in recessionary times.
From the WSJ:
A number of small-business owners have stopped paying themselves as they struggle to keep their companies afloat.
It’s impossible to know just how many owners are affected. But in a sign of the breadth of the trend, 30% of 727 small-business owners and managers surveyed by American Express Co.’s small-business services division said recently that they were no longer taking a salary. That’s a troubling sign for small businesses, which have created a significant share of the new U.S. jobs in recent years.
During past downturns, business owners might have turned to a home-equity line of credit, a personal loan or credit cards to shore up finances. But this time, real-estate values have plummeted, leaving many with less equity to tap, and bank credit is virtually nonexistent.
It’s not uncommon for owners to give up salaries from time to time to give their companies a temporary lifeline, but business advisers and owners say the prevalence of salary cuts now is unusual even for a recession.
Tell us a bedtime story. Have you had to tap into your salary or HELOC to stay afloat?
