A growing number of women are starting their own businesses, and while this is good news, the bad news is that in doing so, many of us are adding to the gender pay gap.
Today there’s double the number of female entrepreneurs compared to 20 years ago, according to the Australian Bureau of Statistics .
For some, the reason for setting up a business is to achieve a better balance of work commitments and personal life, particularly after starting a family.
For others, it is to take advantage of opportunities not available to them in the corporate world.
But there is a concerning trend for female entrepreneurs to pay themselves less than their male counterparts, and to contribute less to their superannuation.
One Australian Bureau of Statistics report showed that women who operate unincorporated businesses have an average weekly cash income of $522, while for men it is $831.
The average weekly cash income for incorporated business owners was $998 for women and $1,451 for men.
In addition, only 45 per cent of women business owners pay themselves superannuation.
Overall, self-employed women’s superannuation balances are on average one-third lower than both women employees and self-employed men.
Women need to be mindful of building wealth for their future that is separate from their business.
Some important tips for women who are setting up their own business, or who are already running their own business, include:
Don’t sell yourself short
Have you valued your efforts for what they are worth? Are you giving too much away for free?
People often think that if you are cheap then you can’t be any good – as the old saying goes, if you pay peanuts you get monkeys.
Be prepared to charge people what you think you are worth.
No business will succeed by undervaluing its goods and services.
Treat yourself as an employee
It’s a good idea to make a point of paying yourself a salary, even if it is a nominal one to start with.
It provides a discipline and an important mindset for the future.
Don’t forget superannuation
Make a habit of ensuring regular contributions are made to your superannuation account.
Business owners can make contributions to their own superannuation account and either receive a deduction in their business or in their own name, depending on their business structure.
Superannuation is a good long term investment due to its tax effectiveness.
Keep business and personal finances separate
It is a common mistake to pay for business expenses from a personal account and promise to reimburse yourself and then forget.
Set things up properly at the beginning and have a separate bank account for the business, and a credit card used solely for business purposes.
It is impossible to keep track of cashflow otherwise.
Think like a man!
Some female business owners have told us that, when they start to doubt themselves, they have found it useful to ask themselves “would a man feel this way?” The answer is usually no.
So when wondering whether you are justified in paying yourself a salary, or making a super contribution, or even to set up the business in the first place, ask yourself if your concerns are justified from a business sense or whether you just need to have more faith in yourself – and do it!