A lot of individuals have questions about when and how much of a salary to choose from their enterprise. It’s a simple question with a straightforward answer, but not the sort of response most entrepreneurs would love to hear.
It’s due to the fact that entrepreneurs don’t feel comfortable unless they can be wholly devoted to their company – which means they will require a salary to support them.
Unfortunately, this typically results in the company owners using their gains (that’s supposed to be committed to the business) so as to support their lifestyle.
The Ideal Time to get a Salary
So, when is the best time to have a salary for a small business?
When all the organization’s reserves are filled (i.e.: General cash reserves, development and research, miscellaneous expenditures, investments, charitable, etc.). It’s because only then is the company that the most secure – and ready to match the ever-changing needs of this marketplace and the economy.
When it isn’t done this way, it seems manageable for a moment, until a significant market change, or an economic recession occurs that puts the business in jeopardy.
Therefore, as the expression goes:
“You need to make sure that the base is laid before you reside in the home.”
This is another very simple question with a simple response – yet again, not a popular one.
“When all the other reservations and expenses are covered, and there’s still money left, then that’s your salary.”
This information is unpopular because usually after all the other expenses and reservations are covered, there’s very little money left. This also unpopular because it suggests that in order to get enough to live on – a company leader might need to wait a couple of years until the company builds up sufficient income to support the lifestyle the company leader is searching for.
Now, there are a number of choices: the company leader could run the company in such a manner that costs are kept low, and make more profit. Or, a business leader can optimize the earnings of the business through multiple profit centers, pricing plans, etc. in a manner that results in more income.
Another idea is for the company leader to identify different resources for supporting himself or herself as: another partner working, living off of savings, obtaining a part-time job in their area, etc.).
The best idea, of course, is to combine all these items, and create increased opportunity to increase profit to support the company leader.
To conclude, before a company owner can take a salary the fiscal basis of the business has to be laid. Only then can you create the ideal environment where the company can grow, it’s stable financially, and the company owner can take home some real cash.