How do you determine how much you should pay yourself when you’re running the company?
What’s the best move for both the business and you individually?
“While there is no one correct answer as to how to pull this off, there are ways to put money in your pocket and grow your business,” writes J.D. Roth, founder and editor of the personal finance blog getrichslowly.org, in his article on Entrepreneur.
Roth says there are three things you should consider when determining your own salary:
1. Pay yourself what you’re worth.
You should treat salary research when you’re an entrepreneur in the same way as if you’re applying for a job, Roth says. This means using online resources, such as Salary.com or Glassdoor.com to see how much professionals in similar positions are earning.
2. Pay yourself whatever’s leftover.
Depending on the business you own, you may be able to pay yourself whatever’s left when business-related expenses and funds for taxes are taken care of, Roth writes.
3. Pay yourself the absolute minimum.
If your company’s in the early stages, consider paying yourself just enough to cover rent and bills. You can use the rest of the earnings to put back into the company for growth purposes.
However, Roth says you need to make sure that you have a salary plan for yourself, meaning your salary will grow as your company grows. Otherwise, “it’s not a realistic model,” he says.
“You probably didn’t launch a business to make less money than you did at your last job,” Roth writes. “The whole point is to follow your entrepreneurial dream to a better life, right? I’m here to tell you that it’s all right to think about funding that better life sooner rather than later.”
Want your business advice featured in Instant MBA? Submit your tips to [email protected]. Be sure to include your name, your job title, and a photo of yourself in your email.
Business Insider Emails & Alerts
Site highlights each day to your inbox.