The False Bottom

In the first year of building Compass CPA, besides repaying my capital investment, I didn’t draw personally until the end of the year when I set my personal income for the year based on results.

Ken and I structure our lives to live entirely off his salary — a personal financial practice we still maintain today. But back then, I used that personal discipline to justify a business mistake. I told myself that leaving my own earned cash in the business was the responsible thing to do for a new firm. At that time, building a business emergency fund felt safe. Watching the cash balance in the corporate account grow higher gave my nervous system a sense of comfort.

Only once it reached my calculated business emergency fund levels would I start drawing regularly and investing the rest. But as another year came, I wanted to do no personal draws again. Surprise — the psychological trap wasn’t Year 1 and the business start up… it was wanting to repeat that personal starvation in Year 2 just because I had become accustomed to the emotional comfort of an inflated corporate account.

Safety.

As a CPA, I had to look at my own numbers and admit a hard truth — my business cash balance was a mirage. When you do not pay yourself a reasonable, market-rate salary for the work you are doing, you create a false bottom in your business.

There is a sharp difference between a strategic financial phase (building an initial runway) and a scarcity response (refusing to leave that phase because you are accustomed to and seek the safety).

It feels like “comfort” but it is actually dangerous. When your business is flush with cash simply because you are withholding your own wages, you inadvertently make softer business decisions. You tolerate scope creep from bad clients, you delay fixing operational inefficiencies and poor performance, or you avoid making hard pivots because the bank account tricks you into thinking you have a large runway.

If you were fairly paying yourself what it would cost to hire someone else to do your work, that cash balance would be significantly lower. And you would manage your business with the sharpness and urgency it actually requires.

Entrepreneurs often subsidize their company’s margins with their own unpaid labour and call it “reinvesting.” I know this and I still did it. But usually, it is just hidden scarcity. We keep cash in the business for comfort. Moving it into our personal accounts and forcing the business to stand on its own two feet is not an easy thing to do.

At a certain point, it becomes unfair to the business and to yourself, not to pull a reasonable amount for personal consumption. You might find that you become a better business manager in the process too. Remember, you can’t call it profit if you didn’t pay yourself.