Are you paying yourself too little?
You probably didn’t get into business just to make money, but it is (and should be) part of the equation. Getting your salary right is an important part of a healthy business. Pay yourself too little and your bills will go up as your motivation goes down. Too much, and you might be at risk of breaking the law – many countries have rules around how much business owners in different sectors can take out.
So, how do you decide on your salary?
The aim is to arrive at a figure close to the industry standard for your role and size of organisation.
The first piece of the puzzle is getting a clear understanding of your numbers – your revenue and expenses.
Then, look into your local market to find out what you would pay someone to take over from you. You might start by looking through job ads that match your role, asking other business owners what they pay themselves and comparing those figures with what you’re currently paying your staff.
The legal structure of your business may impact how you pay yourself and you’ll also want to think about the most tax efficient way to withdraw funds.
If you’re in growth mode and you just don’t think your business can afford to pay you market value, you have some options, like creating a written agreement to pay yourself later.
Get expert advice
Whatever figure you land on, we’re here to help. We’d be happy to give you our feedback, along with helping you structure your pay to maximise tax benefits.
The above content was originally published by Xero Small Business Guides and can be found here. We have updated some of this article for our readers.