I know this has been beat to death...for those of you that put yourself on a salary...how did you figure what was a acceptable ammount? Did you figure it from net proffits after taxes or gross before?? Did you give yourself several bonuses to help hike the monthly net up ? The business is growing...should my salary grow with it? Does your salary stay the same until it levels off? Or should my salary stay the same for the complete year and award myself,sales & VP with bonuses when we hit new goals. I really look forward to what the future brings but I have been asked multiple times by my partner (who has a pregnant wife) if we can set goals in which his salary will increase? Will this play tricks on my accountant if salary changes througout the year? Will that throw up red flags if it does?
I pay myself accordingly what would I make it I was doing this for someone else. Second, what are my needs. NOt wants needs. Third are my cash reserves built up. Meaning I have enough in the bank to fix, repair or replace anything and even a couple of things at once. I put back 25 percent of Gross. Once the cash reserves are up then I take a bounus in addtion to my normal draw. When cash reserves get used bounses get cut until the reserves are up again. After that I maintain a minimum balance in the checking account. usually enough to pay one months bills. If you need all that you make to live off of, then keep working harder to grow, and be disiplined to put the extra back in the bank. This is where most business owners fail, the dont put any money back, they literally take all of the cash they have to buy toys, or keep funding their lifestyle. Then once equipment is gone they have nothing left to even make payments on any thing new becasue they have funded their lifestyle instead of their business. If you woud like additional advise, email me at jasonhisch@aol.com I may be able to help you get a idea of what you need to be doing.
This is the first thread I have really seen about how much to pay yourself. I know it is at least what you would make at another job, but that isn't to much plus you are running the show. It is hard to say what is fair when you are calling the shots, therefore difficult to determine your price. I consider the tax factor too, as a sole-proprietor a lot is taken out.
How about setting a salary based on a % of money the company is making. or base your pay on % you made the previos week and just let your pay be different every week.
I like this topic what are some others input? I did just j hisch said.. I used my money to fund my lifestyle and have fun with rather than put back in the business. BIG MISTAKE< I have learnt that and now want to do it the "right way". SO what is an acceptable amount to pay yourself, or put back in the company?
Difficult to tell for me I guess as this was our first year. I guess I just made it a point to leave enough in the business to pay all expenses until cash flow increases in 2006 (I don't do snow) + enough to purchase/replace equipment. Case in point we will pay all business insurance, health ins., sales tax, matching employee taxes, etc. We have also ordered and wrote check (down payment) for some additional equipment that will be needed for this (2006) season. We do this and also try and salt money away for any expenses that we did not count on. The rest goes to me as I need it or see fit, we keep a healthy amount in our personal savings account and when it dips below a certain level I take an owner draw. This, as I stated, is difficult to pin down personally as this was our first year, hoping to have a more concrete system in place this season as we develop a better handle on forecasted cash flow.
This year I am planning on quitting my full time job and doing lawn maintenance full time. Basically I am paying myself as little as possible. I figured what I need to survive and go from there. It will be salary. A set amount will be transfered from business checking to personal checking automatically every week. As well a percentage of that sum will be deposited into a savings account for personal taxes on a weekly basis.
I guess there is no base as to just what a safe amount is? If I could only figure out what some of the big wigs at TruGreen Landcare,valley crest, brickman etc... are making a year. We don't do nearly the figures but it will atleast give us all something to look forward to ? or envy atleast. This year is going to be a big year for us. We should net 3 times what we did in 05. Never had this much $$ roll through the bank accounts so im not to sure on just how much to leave for unexpected expnses and what to take for myself. We just hired an accountant so im sure a few of these things could be answered by him.
As a general rule of thumb 3 month expeses should be set aside in savings. You checking account should alway have enough in it to pay 1 months expenses. However the reality is that most folks who start Lawn maintenance companie dont have the cash to pay themselves as they are going the business thus the reason for alot of failed business. They try to make it but need to live off everything they make, this will not work and be able to continue to grow. So eat peanust and drink water and buy rice in bulk. If you dont have cash for capital. If you have the cash to pay yourself then by all means pay yourself...A range for a manager in my area would be 35,000-45,000 start there.
