Compiled by Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Mike Michalowicz, host of On A Roll, shares a unique strategy that you can use to get into educational events and training conferences for free by simply volunteering...

Another video by Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Compiled by Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Every entrepreneur stumbles sooner or later with the question of what they should be paying themselves. It is a fair question and one that you shouldn’t ask without doing a little fact checking about your business. Once you do that, you will be ready to determine a salary that your business will, most likely, be able to sustain. Believe it or not, choosing what salary to pay yourself is actually must easier than you may think!

The problem with determining what salary to pay yourself is that most entrepreneurs pick a number and say, “I want to make X number of dollars this year.” Then they try to pay themselves accordingly. However, that number was based off of nothing more than wants, rather than needs or what the business can actually eek out each paycheck.

What happens with many entrepreneurs is that they find they are not able to make as much as they had hoped right off, and they start living off the profit. The profit, however, ends up usually being little, or often, nothing at all in the beginning, so they start to skip taking checks all together. In effect, they pay themselves last, which is a big mistake!

I’m sure that you realize just how important it is to pay yourself first. Without doing this, you will have a real difficult time paying your own bills, and quite possibly, keeping the business going. Doing this may have you running back to beg for your cubicle back faster than you can imagine!

So yes, you need to pay yourself first. But the key here is that you need to do it in a specific way. Here’s the best way to determine what you should pay yourself:

1. What you are going to do is take a percentage of the top line revenue. If you are a solo entrepreneur, meaning you have no employees, you will aim to take up to 40 percent.
2. For those businesses that have employees and revenues of up to $1 million, aim to take 20 percent. For example, if your business were bringing in $1 million each year, you would be taking a salary of $200,000.
3. For those businesses that have employees, and a revenue of over $1 million, plan to take 10 to 15 percent.
   

The key factor here, and what you may be wondering about, is what if you can’t take that amount of the revenue. If you can’t take that amount, then it is clearly a sign that your business needs more efficiencies. This formula is a great way to not only determine how much you should pay yourself, but also whether or not your business needs to be run more efficiently.

If you find yourself falling into one of the three categories above and are unable to take a salary of the suggested percentage, take a close look at your expenses, profit margin, etc. Somewhere along the way, you are not being efficient enough to support your own salary, which needs to be remedied right away.

It is important that you always take your percentage first. If there is not enough money left to pay the bills, you need to become critical of the bills. Find ways to slice the costs and/or to increase the efficiencies.

Being able to determine your own salary is one of the perks of being an entrepreneur and one of the reasons you may have become one. But getting it right is crucial so that you make sure you get paid and the business runs smoothly. Following this will help you stay within a realistic salary that your business can survive with, as well as helping to keep your expenses in check!

By Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Compiled by Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Mike Michalowicz, Author of The Pumpkin Plan, shows you how to follow the "law of success"...

Another video by Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Compiled by Mike Michalowicz, Author of The Toilet Paper Entrepreneur

Let’s face it, we live in a credit society today. Everywhere we go we are paying with credit, getting offers for credit, and wishing we had more of it. But it doesn’t stop with us personally; credit is a big issue that businesses face as well, and on a regular basis. Customers want it, and there is a good chance that you don’t know where to even begin with it, or if you should.

First, let’s start with the basics. Credit is a sales tool. It’s true enough that you don’t need to offer credit. There is no law that requires it and nobody is going to force you to offer it to anyone. Quite simply, credit is a method of getting a competitive advantage over your competition. It’s just one more way for you to attract more customers.

From a cash flow stand point, cash on delivery (COD) or pre-pay (where the customer pays you prior to you delivering your product or rendering your service) is almost always the better way to go. There is no arguing with that. You can argue when your year-end comes, and you are doing all your last minute tax planning stuff, that you may not want cash right away. I get that, but generally speaking, cash on the barrel head is best, for you.

When it comes to customers, well, it’s a little different story. They want to delay paying if they possibly can since that will help their cash flow. This is exactly why you can use credit to attract customers. But it is important to do it the right way so that it doesn’t become a burden for you that leads to losses or you chasing down delinquent accounts.

Keep these three simple rules in mind when it comes to offering credit to your customers. Now mind you, these three rules aren’t something I simply picked out of the thin air. No, these are the methods that the big boys, the credit card companies, use to extend credit to millions of customers every year.

1. Start small. Offer the credit in a small amount at first. Starting out with say $500 or $1,000 (or whatever is appropriate for your industry), is ideal. It would be a mistake to offer a big credit line right from the beginning, as you might get taken advantage of. What you want to do is build a credit history with the customer and avoid taking on a huge risk from the get go.
2. Reward them. After you have been doing business with them successfully, slightly increase their credit line. Be sure to tell them about it once you do. Then after more successful time together, do it again. Every time you increase their credit line, it is a “feel good” moment for them, and it encourages them to do more business.
3. Enforce. Always enforce your extension of credit, just like a credit card company would do. If a client fails to comply with the credit terms they accepted from you, you will need to take action. Start by applying the penalty in fees or interest, and if you need to, use a collection agency.
   

Another important factor to keep in mind when it comes to extending credit to your customers is to maintain a consistent credit policy. Write up your policy, provide it for customers to review, and have them sign, stating that they have read and agree to the terms.

Offering your customers credit is an act of trust. Your customers will appreciate the trust that you are extending to them and in most cases will not abuse it. You may just find that by offering credit it puts you head and shoulders above the competition!

By Mike Michalowicz, Author of The Toilet Paper Entrepreneur

The lifeblood of any small business enterprise is money. But like with any commodity, such as oil or gold, access to money has a price tag on it. There are investors who may well provide capital for your business. However, it's not your interest they have in mind but their own.

More specifically, business investors have one question they want you to answer: What's in it for me?

To better answer that question, business owners seeking funding have to figure out what type of capital investment they should pursue. Usually that means venture capital (VC) versus angel funding.

So far, the news on venture funding is brightening in 2012. According to PWC MoneyTree's quarterly outlook on business funding (PDF), venture capital is up 22% from January 2011 to January 2012.

The study reports that venture capitalists invested $28.4 billion in 3,673 deals in 2011, the third highest year for VC funding in 10 years.

Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said:

As previously projected, venture capital investing in 2011 exceeded 2010 levels and ranks in the top three years for VC investing in the past decade. We saw a resurgence in investments in Clean Technology and Internet-specific companies in 2011, as well as a bit of a jump in average funding in the Internet sector. However, while venture capitalists continue to show their interest in these areas, they are acting prudently and not chasing excessive valuations. Accordingly, despite the increase in investing, we're unlikely to see these sectors overheat like we saw in the 1999 to 2000 era.

For its part, angel funding is on the rise, according to a new report from Silicon Valley Bank (SVB). The study notes that median angel funding rose 40% in 2011, with the average deal around $700,000, as opposed to $500,000, SVB says.

California business owners earned the lion's share of angel money, with 29.8% of all deals in the U.S. last year. Technology and health care firms together accounted for 58% of all angel capital, SVB says.

What's the better deal? Here's a point-by-point breakdown.

Definition of Angel Investing: An angel investor invests in a new business, offering capital for startup or expansion. Angels are not usually among the so-called "1%" -- many have annual incomes of $200,000 or less. They're drawn to startups for a higher rate of return than they might get in the stock, bond, or real estate market.

The Good

• Average angel investments are between $25,000 and $1.5 million -- plenty of cash for a new startup.
• Angel investors often are local. They tend to be wealthy investors, even retirees, and might even be your next-door neighbor.
• Angel investors tend to make up their minds quickly, get you the cash quickly (if you're approved), and usually pay up with a lump-sum check.

The Bad

• Angel investors want a big stake in your firm. Expect them to ask for 25% or more.
• Angel investors don't like risk. The more uncertainty an angel sees with your firm, the less likely he or she will make future investments.
• Control is a big issue with angel investors. They may want more decision-making rights than most business owners are comfortable giving.

Definition of Venture Capital: Venture capitalists invest in startup companies that offer the possibility of profit, but with no guarantee the company will make one. They tend to make higher volume investments than do angel investors, and may likely take a larger consulting and management role as well.

The Good

• Cash is king with venture investors -- and they tend to have lots of the green stuff. The average investment is high -- often between $500,000 and $5 million.
• Besides deep pockets, venture funders have great business connections, and can hook a business owner up with good advisors, smart lawyers and accountants, and savvy sales and operational consultants. The mantra for VC's is this: We're all in this together.
• Those connections can also lead to investments from friends and acquaintances. Venture investors are a close-knit group, and often recommend deals to other investors. So if you fail with one VC outfit, ask for referrals.

The Bad

• Venture capital firms want the moon from business owners -- and more than that. Entrepreneurs can anticipate VC investors demanding 50% of future profits.
• Venture investors like to take their time. They tend to take six months or more before making a decision, and will keep business owners hopping with repeated requests for documents, paperwork, and financial analysis.
• VC investors don't mind asking for a piece of your company, especially if you're cash-depleted. VC firms often demand a fat equity stake in your firm. But be careful -- giving an investor 50% or more your company takes you out of the driver's seat.

Take plenty of time deciding between an angel investor and a venture capital investor. If you have your sights set high, VC firms have more cash, but will want more control. In contrast, angel investors won't ask for as much control of your firm, but don't have as much money to offer, either. It all depends on what your company needs, and how close a business partnership you really want from a financial investor.

Brian O'Connell is a former Wall Street bond trader turned journalist, who's been covering business news and trends for over 15 years. Brian's work has been featured in dozens of renowned business publications, including the Wall Street Journal, TIME, CNBC, and TheStreet.com. Brian is a freelance small business journalist for Vistaprint, the leading online provider of marketing products and services to small businesses around the globe.

Image by Images_of_Money on Flickr

Compiled by Mike Michalowicz, Author of The Toilet Paper Entrepreneur