This is often the toughest issue to discuss with my clients. The business is doing well and as a result the owner increases their personal lifestyle. Not too excessively, but more than the business can afford if there is a downturn.

While the business is doing well it is not really feeling the effects of the additional salary. Also, the owner feels entitled to a larger salary as they probably took a smaller salary when they were building up the business. This larger salary may even be market value when compared to the effort and work performed. This is all true and all understandable. 



Here’s the problem: when the business has a downturn, the owner cannot adjust their salary to a lower level due to an increased personal lifestyle. Additionally, if something happens in the personal life of the owner and they need money, many times they take it from the business. This puts pressure on the cash flow of the business.

Unfortunately, there is only one way to manage this kind of situation and it takes discipline to do it. The first thing to do is determine a modest and consistent salary amount. During good years, take a bonus. That way when bad years occur the business is not strained due to the owner’s salary.

It has to be the business owner who shows discipline and responsibility for their business.