Many of us aspire to rapidly build a thriving practice. We want to add clients, employees, revenues and, most importantly, profits. We may have different reasons for seeking to build a solid business, but we’re headed in the same direction.
Unfortunately, it’s easy to derail our plans as revenues grow. The numbers get bigger and bigger. Our smart marketing, management and use of technology is working. We’re working hard and we feel, rightly, that we deserve to enjoy the fruits of our success.
The first thing many of us do, and I’m the first to fall victim to this behavior, is to increase our salary as the revenues increase. It’s only natural to feel that we should make more if we’re generating greater and greater revenues.
Unfortunately, increasing the amount you take out of the business has a direct impact on the long-term growth of the business. The impact is especially significant early on because of the compounded growth you might have achieved over time. Slowing your growth by 10% in year one can cost you millions of dollars over a 30-40 year term. It’s ridiculously expensive to pull cash out now.
So what should you be doing with the cash? You should invest it in the business. Use it to take your marketing to the next level. Use it to enhance the technology that improves your bottom line. Use it to add professional management, upgrade your legal staff and improve your people. Use the cash to accelerate, not decelerate the rate of growth. Remember, growth now is the most valuable growth you’ll ever have – because, later, a 20% growth rate, for example, means much more when it’s applied to a larger base.
How to you resist the temptation to suck out the cash? You’ve spent years in school, more years getting to this point and it feels right to take your income to the next level. You’ve got to find balance. Reward yourself, but keep it small. Remind yourself that a new car today might cost you a paid-off house ten years from now. Get your family on board. You’ll find a balance that allows you to maintain a decent lifestyle while continuing your rapid growth. It’s tricky, but by being conscious of the trade-offs you’ll make the right decisions.