Small businesses come in all shapes and sizes. You could run your company out of your home office or you may have an actual building. You may be the only worker or you might oversee several employees. No matter who works for you or where you're located, you're going to have to pay your staff and that includes yourself. However, how much do you make? That may be a hard choice to decide on. However, the following aspects could help you determine your salary.
It doesn't matter what kind of business you have, the ultimate goal is to make a profit. Unfortunately, expenses and bills create an obstacle to you keeping the money you earn. You'll have to factor them into your revenue to determine your actual profit. From there, you'll be able to determine what your financial plan will allow for your salary. You may have to skip getting paid when you first start out, but as your business becomes consistent, you can take a percentage of that money, the U.S. Small Business Association suggested.
How did you start your business? Did you have to take out commercial loans or borrow money from friends and family? What about credit cards? If you're already indebted to people, you're going to want to consider that when setting your salary, the National Federation of Independent Business explained. You'll want to pay off those loans as quickly as possible, which means your salary is going to be lower than you'd like it to be. However, you're going to want to get those deals taken care of before they accrue too much interest, resulting in you paying significantly more than necessary. Pay yourself enough to live comfortably, but then send the rest to your lenders. You'll always be able to increase your salary afterward.
The type of company you have and how it's legally structured may also determine your salary, according to the SBA. Taking too much money from your profits could land you in trouble with the IRS. You don't want to raise any red flags, so it's best to talk to financial services to help you determine the best possible solution. Paying yourself too little won't help you, but giving yourself too large of a percentage won't reflect well on you.
What are others in similar positions in your industry paying themselves? Looking at your competitors can help you set standards for yourself. Try checking out businesses in your area as well as in different regions. Owners on the west and east coasts generally pay themselves more than those in the Midwest and southern areas, according to the NFIB. You may not be able to pay yourself exactly what they're making, but you'll be able to determine what the average salary is for your job in the area.
Deciding what to pay yourself can be a stressful decision. However, when you look at the factors surrounding your businesses, you'll be able to figure out a percentage that works for you and your finances.