Takeaway: When you pay yourself with intention, you can make better decisions about the direction of your business and your personal budget.

In massage school, many of us spent a lot of time thinking about intention. When we lay hands on a client, intent matters. Is our goal to impact the nervous system or facilitate change in the deeper soft tissue? Are we trying to stimulate the lymphatic system or relieve pain? Great bodyworkers clarify goals and intent at the beginning of every session. 

Far too many massage business owners do not apply that same awareness of intent to their money management. Many self-employed bodyworkers fail to pay themselves, or fail to pay themselves intentionally. This can lead to a lack of awareness regarding how much money a practitioner earns and how much of that money they take home. 

A massage therapist may be unaware of what they are actually making because they don’t run and review reports monthly, or they live with a spouse or partner with whom they share a household budget and taxes.

At tax time, lots of business owners are surprised by how much money they earned and wonder where that money went. (This happens when a business owner buys personal items and makes other nondeductible expenditures through their business account.) Or the reaction at tax time might be disappointment about how little a business owner made and took home. 

What does all this indicate? Lack of intention. 

The solution is cash-flow management—a flexible system for making decisions about your money. Cash-flow management involves thinking about your priorities and what you want your money to do, and making those decisions before that money comes in. Good cash-flow management allows you to adjust that plan as you go so it serves you and it serves your business.

When you pay yourself with intention, you can make better decisions about the direction of your business and better decisions about your personal budget. Paying yourself well and consistently will also help you stay motivated, avoid burnout, and keep better boundaries in your business.

Let’s start with some basic financial terms—gross, net, and draw. Gross income refers to the total amount of money you collect from providing massage (and whatever else you do and sell). Net income is the amount you have remaining after paying all your business expenses. In sole proprietorships and LLCs, the amount of money you pay yourself is called an owner’s draw. (If you have an S-corporation or C-corporation, payroll is a little different, but you know that already. The same intent and ideas apply, so keep reading.)

We get a little fussy with these terms because marketers often advertise, “You can make $100,000 as a massage therapist using my system!” when they’re trying to sell you their business-building materials. They’re talking gross income. But if you spend $45,000 on operating expenses and take home $48,000 after taxes after providing 20 massages a week for a year, that becomes a little less exciting, doesn’t it?

When a business owner is surprised or disappointed by those gross and net numbers, the cause is easily identifiable. They’re not earning enough money (gross) or their expenses are too high, or both, making their net income low. 

Understanding Your Pay

Start by paying yourself on a schedule—weekly, every other week, or once a month, whatever feels best for you. It should be frequent enough that you really feel the fruits of your labor and that it matches your personal spending style. 

When I first learned to pay myself, I heard the phrase “Be the best boss you’ve ever had,” and it stuck with me. What does a good boss do? They pay you fairly, make sure to take out the right amount for taxes, help you save for retirement, and pay you for vacation and sick time. 

Do that for yourself. Be your own best boss. When I sit down to handle my bookkeeping and pay myself, this is the order in which I spend my business earnings:

• Owner’s draw
• Taxes
• Retirement
• Monthly operating expenses
• Emergency savings, sick pay, and
• vacation savings
• Savings for larger purchases

Here’s what that looks like in practice: I pay myself a draw by moving money from my business account into my personal account. Then, when that draw gets to my personal account, I set aside a percentage to pay quarterly estimated taxes. Talk to your tax preparer to determine what your percentage should be. 

Next, I move money from my business account into my Solo 401K, a retirement account. 

Then, I pay all my business bills for that month, purchase supplies I need, and track subscriptions that have been paid since the last time I did bookkeeping.

Any money left after paying bills is put in a savings account for emergencies, sick and vacation pay, or savings for a significant purchase, like a new massage table or expanding my office. Once those savings accounts are fully funded, I can pay myself more!

Adding Up Your Portion

This is all fine and dandy, but the big question is, “How do I figure out what my draw should be?”

There are two ways to determine the amount of your draw—the percentage approach and the flat rate approach. 

Look at your last 12 months of income and expenses (or whatever you have if it’s less than 12 months). If you made $40,000 (gross income) and spent $15,000 on rent, utilities, insurance, supplies, etc., you spend about 38 percent of your gross income on expenses. 

Using the percentage method, you can pay yourself about 60 percent of your gross each month. If you are contributing to a retirement account, you can draw 50 percent of your gross income and put 10 percent into your retirement fund. If you want to save for an electric massage table, you could lower your draw percentage for those few months you are saving and put the extra aside. 

There is flexibility in this system. If you set aside money for gift certificates and packages, set that aside before you figure the percentage; bring it back in the week or month the gift certificate is redeemed. 

Using the flat rate method, you look at the average gross income and expenses and figure a flat rate to pay yourself every week or month. The months you are busier, you put aside the “extra” income after expenses are paid to cover the months you aren’t so busy. 

You don’t have to do this all at once. (But you can if you want!) If you haven’t been paying yourself or you can’t stomach the idea of sifting through a year of income and expenses because your bookkeeping is erratic, this can feel overwhelming. You can pick a low number like $100 and start paying yourself that amount every week. 

Get a routine going and increase that number every few weeks or months as you get a handle on your income and expenses. 

Adjusting Your Cash Flow

What happens if you can’t pay yourself a living wage? It’s time to make important decisions. You’ll need to increase your gross income, lower your expenses, or both. 

Maybe it’s time for a price increase or adding a few more clients to your weekly schedule. Trimming expenses can be as simple as finding a better cell phone provider or as complicated as looking for a colleague to share space with. You get to decide, and now you can make those decisions from an intentional and educated place.

Remember, cash-flow management is a flexible system. You can adjust and readjust your numbers until you find the sweet spot that keeps your business serving you.