How much should you pay yourself, if at all?

Discussion in 'Growing and Managing a Business' started by Kay, Jul 27, 2010.

  1. Kay

    Kay
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    That was what this blog post at the New York Times was discussing. Jay Goltz, author of the post, had a different solution than the compensation experts he disagreed with did.

    I'd like to hear some thoughts on that subject and his post. Should it be a percentage? Should you define a set salary at all, or should you just takes what's left? What are the pros and cons you see of paying yourself or not? Should you take into account the factors that Jay's discounting? Please share your take on this. :D
     
  2. Fergal

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    I'd agree with Goltz, if the business is not making a profit it really can't afford to pay the owner and if the business is making huge profits the owner is entitled to a large share of those profits, because he / she has taken the risk and made the sacrifices to set up and manage the business.
     
  3. Lucywu2012

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    That 's ture, as long as the company owner get more porfit, they can make a larhe business and the employee can benefit from it
     
  4. ArcSine

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    I'm in the Goltz camp as well...particularly his comment, "To some extent, the owner’s salary is a false issue." Merely thinking in terms of "how much salary for an owner" creates illogical connections at the outset.

    As an entrepreneur, my job is to (1) organize a base of assets (equipment, inventories, employee staff, etc.); and then (2) do everything I can to generate a revenue stream that exceeds the contractual costs of these assembled assets. If I'm successful, such excess is mine. If unsuccessful, then (most likely, unless my lawyer is sharper than the bank's ;)) I'll bear the cost of the deficit.

    I say "contractual" costs, because in the case of each asset I assemble, I strike an arm's-length agreement with the provider as to the asset's cost, beforehand. For the cash I borrow, the bank and I agree as to precisely how much interest I'll pay to rent that capital. With each employee, we shake hands on the agreed-upon compensation package prior to the employee's first day...and so on.

    So again, if I can generate revenue inflows that beat the sum total of all these obligatory costs, such positive spread belongs to me. If this positive net profit exceeds the amount I could earn working the same hours for someone else, plus gives me an adequate return for any personal capital I may have invested, then the biz will exist. If not, I'll direct my efforts elsewhere.

    It's not unlike any typical investor: An investor borrows at X% and invests that cash to earn Y%, and the spread between X and Y is simply the investor's gain or loss. No one even asks, "How much salary should the investor pay himself?"

    Cheers, all!
     

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