How do you pay yourself in a small business?

Discussion in 'Growing and Managing a Business' started by wameyo, Jun 20, 2015.

  1. wameyo

    wameyo
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    Most big successful corporations have a payment structure where everybody starting from the CEO is paid salary. This ensures accountability and the extra money is at times ploughed back so that the business can grow. But what about a small business where you are both the owner and CEO? How do you make sure you don't eat all your profits? What's your best payment strategy?
     
  2. Damien Lee

    Damien Lee
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    When you start a small business, very likely you're going to be on a very tight budget. And there's a pretty good chance that you're not even going to turn a profit in the first couple of months of operation. That means there will be no possibility for you to draw money from the business. You will have to rely on personal savings to cover your monthly expenses until your business becomes profitable.

    However, if you don't have any savings you could look into small business funding initiatives within your country. Of course this funding isn't handed out to just anyone, you will be required to present a business plan and they will decide whether or not your business is feasible. Truth be told, only a small amount of businesses receive funding this way, there are no guarantees that your business proposal will be given the green light.

    The best advice I can give you, particularly if it's hard to get hold of capital is to operate your business from home. Do not hire any employees and focus strictly on a business that can give you a quick ROI (return on investment). Find a product that you can sell, or service that you can provide that is not very costly for you and that there is high enough demand. In this manner you will be able to start giving yourself a salary within a relatively short space of time. But also remember, your monthly salary will never remain constant, as it's ultimately a reflection of your own performance and also correlates with the market realities of the industry you're engaged in.
     
  3. pwarbi

    pwarbi
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    When your starting up any small business, one of the first thing's you will have to work out and ask is, will you be taking a wage? You'll often find that the owner, the person who's idea it is will often have to work for nothing in the beginning.

    Hopefully the business will start to grow and eventually you'll be able to take some sort of salary, but that could take some time. It's best to make sure you have enough capital to not only start your business and keep it going, but also you have enough set aside for your own living costs.
     
  4. Corzhens

    Corzhens
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    The entrepreneur has no salary while the business is still on the ground. But when it is up and about with a good profit, that's the only time the boss would earn. Some small businesses flourish because the boss has another means of income like a pension or shares of stocks in other companies. But for a struggling businessman, part of the business plan is the wage that would be paid to the business owner.

    If the capital is small and the overhead makes for a tight budget, that is not a good situation to be in. And what more if the owner has no other means and expecting his business to be his livelihood. It will be a disaster.
     
  5. pwarbi

    pwarbi
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    Like you say, profit plays a big part in any business and especially ones that are just starting out.

    If somebody starts a business expecting to be successful overnight then they're going to have a massive shock, because it doesn't matter how hard you work, you won't be ruling the world after a few months.

    Owning and developing a business takes time, and if your not prepared to look at things long term, then there's no point in even starting.
     

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