Owners Salary as a % of Total Sales

Discussion in 'Business Operations' started by heygrassman, Mar 13, 2002.


What is a good ratio of owners salary as a % of total sales? (Owners Sal/Total Sales)

  1. 6-10%

    2 vote(s)
  2. 10-15%

    2 vote(s)
  3. 15-20%

    4 vote(s)
  4. 20-25%

    4 vote(s)
  5. 25% or more

    6 vote(s)
  1. heygrassman

    heygrassman LawnSite Senior Member
    Messages: 509


    I am sorry about all the questions related to %'s but I am building my business plan and I am searching for what is really happening in this industry.

    I am doing this as a poll in the hopes people may answer with some annominity.

    What is the total salary that you are paying yourself as a % of total sales? Owners Salary is $6 and total sales are $100 then the percentage is 6%.

    I am working on financials and I am trying to balance eating and re-investing...

    Thanks in advance for anyone willing to shout out.

  2. LawnLad

    LawnLad LawnSite Senior Member
    Messages: 738

    Grassman - this post isn't necessarily directed at you. But more of a suggestion for others looking on trying to do the same thing as you.

    One thing that will be difficult to ascertain from the poll is what percentage of the the owners in the income categories are working or billable as opposed to strictly over head. As the business grows, the nonbillable functions or requirements of the business grows for the owner, pulling him away from production work.

    Frank Ross suggests that an owners salary plus adminstrative help does not exceed 10% to 13% of gross sales. Is this hard and fast? Will this be different for design/build companies versus maintenance versus application companies? Sure it will. Each has a different overhead structure. Different sales cost, etc.

    If the owner provides the labor or not, someone has to fill the production postion. So if an owner makes $40,000 a year, but 30% of the time is spent producing, then I would recommend to try and simplify and compare apples to apples, then assume $12,000 direct labor (which you would have to hire anyways), and $28,000 in overhead. Tracking the amount of time is not difficult - but can be cumbersome if you're not used to "punching" yourself in on a time sheet/clock. I would recommend using just the hours of the work day - 7 am until 6 pm ish. As an owner, you're going to put in more hours burning the midnight oil. This is sweat equity, and something that will skew your assumptions if you try and consider all the time that you spend in your business. If you were to hire someone else to run your company, they will not work until 10 pm at night. Make normal business assumptions for your comparisons.
  3. Kent Lawns

    Kent Lawns LawnSite Senior Member
    from Midwest
    Messages: 870

    The % will decrease as sales increase.

    But I'd still rather make 5% salary of 3,000,000 sales than 90% of 150,000.
  4. John Allin

    John Allin LawnSite Bronze Member
    Messages: 1,488

    Kent Lawns and Lawn Lad are both right on..... from my experience, that is.

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