how do business owners who operate a business that loses money year after year, afford to pay themselves?

Question

Let’s say you went $100,000 in debt starting a business, and it costs $5000 to operate every month and you make only $4000 every month for the first year.
But you have a house and family, etc.

Where is the money going/ coming from??

In: Economics

Answer 1

I worked in a startup before. Our salary takes precedence (including the owner) to other expenses. So even if the PnL is negative for the month, it’s been factored in into the expenses. As long as we’re positive at YE, it’s all good. If not, last year’s income will absorb it, the current year’s loss.

There’s also a liquidity ratio that i maintained to ensure that we all get paid on time.

If that’s insufficient, then it’s line of credit.