How Much Should You Pay Yourself?

<img class="thumb" title="Post Img " src="http://decor.cameoez check” alt=”” />If you are like many of the readers of this newsletter you are an entreprenuer, perhaps having started your own store and maybe adding other locations, or at least hoping to grow and expand someday. Along the way, you may wonder how much you should be paying yourself. The answer depends on several factors.

First, the survival of your business is primary, since if it doesn’t make it, the question of how much to pay yourself or anybody else will be moot. So most entreprenuers keep their own salary low at first, until the business is at least moderately successful and stable. It’s usually wise, in fact, to wait to increase your personal income until you have seen strong performance for several months, if not years, since a downturn can sap your resources very quickly.

One independent commercial interior designer just starting out used the technique of asking how much he had to have personally to survive. He calculated that he needed $24,000 per year. In his case, he likely had savings and little debt. Your needs may very well be different, but that is a place to start. ENTREPRENUER magazine has a handy calculator that you can use to calulate your needs (click here).

Another approach is to find out what others make in your business. The average salary of a retail store manager is about $35,000 but the average entreprenuer salary is about $61,000 (source).

Then of course there is the consideration of what your company can afford. If you know what your minimum needs are and what is the average in your field, you can then determine what is realistic for your business. That will require you to examine your cash flow position, considering operating expenses such as inventory expense, lease payments, staff salaries, taxes, etc.

There’s a saying that, when you are an entreprenuer, everyone else gets paid before you do. It takes time to build a stable business and reap the rewards. Perhaps you have already arrived or you are still in building mode, but if you hang in there, eventually you will be able to reward yourself for the time during which you sacrificed.