How Much Are You Worth? Make Sure Your Paycheck Reflects It
How to figure out when to collect a paycheck and how much it should be.
Your business may be your passion - but it should not be your passion project. You need to get paid for the work you do. That’s a challenge for many entrepreneurs who are tempted to pay themselves last. But that’s not a good policy.
You know how the flight attendant tells you to put your oxygen mask on first before assisting anyone else? Same goes for running your business. If you don’t make enough money to survive, you won’t be able to continue running a business that can employ others and provide a service to your community. We’ve all heard stories about founders who didn’t take a paycheck for years, but that’s not doable for most people.
The average small business owner makes $70,000 a year
So how much should you pay yourself? Obviously, it’s hard to know exactly and will depend on your revenue and length of time in business. According to BusinessNewsDaily, your business should at least be profitable and have sustainable and steady income before you start taking a paycheck.
Gusto, a payroll software company, recommends your salary be roughly 30% of your net income. You can check out their Business Owner Salary Calculator here. The average small business owner makes $70,000 a year, which includes established long-term business owners and is likely much higher than the average new entrepreneur.
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Once you decide on how much to pay yourself, it’s important to remember that a salary is not just taking money out of your business bank account. You will have to decide whether you want to collect an actual salary, from which taxes and other deductions will be made or whether you want to just take money out of the business (called an owner’s draw) and settle up with the IRS at the end of the year. There are lots of rules and regulations about this so be sure you talk to an accountant before you start taking any payment from your business. To do this week: Make sure you’re paying yourself enough!
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