You're the business
owner and you set the budget, so the size of your paycheck is entirely up to
you. But while the freedom of setting your own salary sounds great in theory,
in practice most business owners find it a tough call. Should you pay yourself
what you need to cover expenses? What your business can afford? The salary you
left behind to launch your business?
Your best bet is to
factor in all three, and more. For your business to succeed you might consider
taking a temporary drop in income. On the other hand, paying yourself far less
than you're worth, or nothing at all, paints an unrealistic picture of the
viability of your business for you or potential investors.
Here are the factors
to consider before determining exactly how much to pay yourself.
Calculate What You
Need
Your salary will depend on your living expenses, financial situation and
comfort level with drawing on personal savings. First, put together a
comprehensive list of your expenses [see worksheet below]. Be sure to include
all annual, quarterly and monthly expenses. These include everything you'll
spend money on, such as your rent or mortgage, car payments, car insurance,
credit cards with outstanding balances, gym membership and grocery bills.
Underestimating personal expenses is one of the biggest mistakes a new business
owner can make. If you slip into the red, chances are your business will, too.READ MORE >>
