Tips For Setting Salary As A Business Owner
Mukesh Ambani takes Rs. 15 Cr as his annual salary, Snapdeal co-founders earn Rs. 46.5 Cr each, Flipkart founders take situs slot online home Rs. 20 Cr every year, Mark Zuckerberg prefers to pay himself $1 per year and Narayan Murthy earned just Rs. 1 as his annual salary.
So, what’s the right salary of an entrepreneur?
If you are small business owner with few or even no employees then it becomes very simple to decide what to pay yourself as a salary. But in the fortunate circumstance of you having your business grow, or having a bigger business to begin with, or are in the process of acquiring a new business partner you will need to find how much you can actually pay yourself.
Going about setting your own pay can be a daunting task if not done right. This is even more true in the markets where in lots of fluctuations are seen.
Why you should draw a Salary as a Business Owner?
The main reason why business owners should pay themselves a fixed salary is to regulate the amount of money that is withdrawn from the business capital as a whole. If you don’t fix a set amount as your salary, then you won’t be able keep track of your business expenditure as effectively.
Furthermore once you pay yourself a fixed salary as a business owner, you will be further motivated to run the business smoothly while keeping up with self-appreciation. Such intangible factors is a great motivator for small business owners.
No Standard Formula for setting your salary as a Business owner
Just like any personalized task, setting your own salary cannot be achieved through a standard formula. You will have to play around with certain variables such as business capital and business overheads.
If the business in question is still a fledgling start-up then the salary will be more or less whats left after breaking even each month with the bills paid and the sales made. If the business has continuously shown profit, then it is reasonable to earmark surplus profitable earnings as part of your self-pay. But this is to be done in tandem with industry standards.
You will eventually have to book an accountant or a tax attorney, or both to regulate what you are paying for yourself. This is because the legal structure of your company will dictate the pay structure to a certain extent. The thumb rule is to avoid taking too much of a percentage of the total business revenue as your pay. What is reasonable can be arrived upon by the accountant.
The main logic here is to focus on the growth of your business into the future and not to be worried about your current take home pay which is inconsequential in the long run. You should also be prepared to be slightly flexible when required in situations like when the cash flow is restricted or when the markets are down.