You would think that as a business owner you would be making a huge salary and driving a luxury sedan to work everyday and though there many business owners whose done well for themselves financially speaking owning a business does not mean that you’re rolling in the dough. A business can generate thousands of dollars in revenue every week but as a business owner there is a lot you must account before you decide to pay yourself a fat check and figuring out how much you should get paid really depends on a few things. Profits are the difference between your revenues and your expenses which are your taxes, payroll, bills and inventory cost what ever is left is what you can keep. This can be hard to figure out fortunately though there are software programs that exist that can keep track of all of this and calculate what you should be getting like QuickBooks online and Wave Accounting. It is always best to have a program that can do all of this for you and it is advised that you know how to find how much in profits your business makes every month through those programs and getting one that can calculate where you can make tax deductions is a plus.
One of the best advice a business owner can take when it comes to figuring out how much you think you should get make a list of all of your business expenses to determine what your future earnings should look like which can help you determine how much you should earn but just before you decide that you’ve got the right figure there is one more thing you should think about when it comes to your business and that is reinvestment. The money you’re left with after everything is said and done can be used to reinvest in the company and considering that the amount you take as your salary is taxed and the amount that you keep within your business is not you would be doing yourself a huge favor by saving now to reinvest. Reinvesting in your business increases the chances of it growing and that could mean a bigger paycheck which is good but reinvesting in your business is something that is easier said then done.
Balancing how much you want to make and reinvest requires time requires a great deal of self control. You should try to picture your weekly profits and estimate what they would be if your business grows by a certain percentage because despite the fact that your business is growing it is a fact that some businesses end up losing profit even as they expand the reason for this is the extra expenses that comes with expansion that have not been accounted for. Cathy Iconis a CPA with Iconis Group a outsourced bookkeeping firm says ” “If you were selling $100 of product and making $20 of profit after expenses and payroll, you want to make sure you will be doing the same when selling $500—some companies grow and lose profit because they add new expenses and can’t support their current structure—which then affects a business owners’ pay,”.
If you really want to know how much you think you should be making you can always compare the price industry standards when it comes to business owners in your region to get a close estimate of what you think you deserve. There is a method that can be used to determine your ‘true wage’ in which you do a cost analysis of each of the job functions you perform and compare it to how much it would cost to have someone else do that same job because you can actually save money by outsourcing some of your responsibilities and it gives an accurate insight as to what your market salary should look like. Another term that can be used is ‘reasonable compensation’ which is the amount the government believes you should be making based off your profit, turnover, business size and your market sector. Asking yourself questions like how much a similar business would pay for a similar service that you provide to your own business or whether the amount you’re paying yourself is fair compared to what you’re paying your employees. There are a lot of other things you can factor into this too but in the end you’re the one who has complete control in how much you’re willing to spend in your business and pay yourself so as a business owner you could ask yourself this question and that is if you could pay what you think you deserve would your business be able to afford it?