Most agency owners are underpaid. Are you missing out on some of the ways you can compensate yourself as an owner?
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Hey everybody, Drew McLellan here from Agency Management Institute, this week coming to you from Toronto, Ontario. I had a conversation with an agency owner today that made me think about that a lot of times, I think we forget as agency owners that we actually serve two roles inside the agency. The first is we're an employee. We do some tasks that the agency would have to pay someone else to do if we didn't do them. Right? And that's how we get our paycheck. Our paycheck is basically you are the president, you're the CEO, you're the COO, you're the CFO, whatever role you play, you do a job for the agency that the agency would've to pay someone else to do if you didn't do it. So here in the States, that would mean that you would get a W-2 or a paycheck for that job, right? A salary. Anywhere in the world, you're going to get a paycheck for the work that you do as an employee of the agency. But we have a second job, which is we are the owners of the agency, and that's where dividends or bonuses or distributions come in. So, our paycheck is for the work that we do every day. Our dividends or distributions or bonuses are the reward we get for the risk we took in starting or owning the agency. And you absolutely need to make sure that you are building your income with both of those pieces in place. And there are actually five kinds of income that I want you to be thinking about. So, there's your paycheck or your W-2 income. There's dividends, distributions, bonuses, whatever you want to call them. So basically, you're taking a portion of the profits of the company, and you're taking that as a reward to you as the owner for taking the risk of owning the business. Hopefully, in your company, you have some sort of retirement plan where the company makes a contribution. So that's an IRA or a 401k, again, here in the States, or whatever it is in your country. But that you have some sort of retirement fund that the company funds on your behalf. So that's paycheck or pay path if you will or pay channel number three. The fourth channel is, for many of you, your agency, it would be a great idea for you to have a defined benefits program or in essence, a "private pension" program. They're not as expensive as you think and they are incredibly fruitful for you as an agency owner. We offer a defined benefits program at AMI. We don't make any money on it. We're just the conduit to it. But if you want to know more about it, let me know. So that's the fourth way. So again, W-2 income, paycheck income, distribution and dividend income, 401k or IRA contributions from the company or retirement contributions, defined benefits. And then the last one are pass-throughs, expenses that you would normally pay for with after-tax dollars that you can legitimately run through the business with pre-tax dollars paying for it. It's a deduction to the business. It is a savings for you. And if you are maximizing all five of those... And for some of you, there's a sixth, which is you own the building that your agency lives in and so you've got rental income coming from that, right? So it's going from the agency LLC or S Corp or whatever it is, into the property LLC or S Corp or however that's structured. So again, you can have six, actually, levels of income if you own your own building. But many agency owners really only take advantage of their salary and maybe the distributions or dividends. That's leaving a lot of money on the table. So I want you to stop doing that. I want you to start thinking about building out your compensation in a bigger, broader way, acknowledging that you play two roles in the agency. You are both the employee and the owner, and you should get rewarded for both. All right? Hopefully, that was helpful. I'll see you next week.