Most microentrepreneurs start their businesses when they are in transition—often when they have lost a job and are looking for another. They usually plan to operate the business only until they find a regular job with an established employer. With this short-sighted mentality, they fail to approach their business like a real business that needs to be profitable in the long run. For example, the business owner might start out with 500 pesos, make 200 pesos in a single day, and take all 200 pesos home that night. The next day might be really slow. The owner might make only 50 pesos and take that money home. Taking all of the profits home each night prevents the owner from ever building any substantial foundation for the business and guarantees that the business will forever be small. Taking a fixed amount as a weekly salary would be much better. By establishing and adhering to a reasonable weekly salary, business owners can ensure that an excess amount of capital remains in the business as a security fund.

Instead of adopting a short-sighted philosophy about business, you must recognize that if your business is to succeed, it must be able to grow.

In order to grow, a business must have an ongoing source of capital—capital that should come from reinvested business profits. In order to apply the principle of paying yourself a livable salary, you need to talk with your spouse or family and decide how much money you really need each week. Then you must discipline yourself to generate more than that amount in weekly profit and to take out a salary of no more than that exact sum each week. You can’t build a business unless you put a sufficient amount of profit back into the business each week. Reinvesting your capital enables you to do things like buying in bulk, establishing good credit, and developing new product lines to boost sales.