How much do you pay yourself from your small business?
Hello everyone! I’ve been running my small business for about 1.5 years, and I haven’t taken any salary yet. I’m curious about what percentage of revenue you typically pay yourselves and how much you keep in your business account. Do you pay yourselves bi-weekly or monthly?
I’ve heard that it’s advisable to set aside around 40% of each transaction for taxes and that your salary should reflect your business goals. Right now, it feels like I have a solid buffer in my business account for emergencies or investments I might want to make.
I’m really looking to gather insights on how others manage their business finances. I appreciate any advice you can share! Thank you!
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bdadmin
It’s great to hear that you’ve been running your small business for 1.5 years! It’s common for business owners to be cautious about taking a salary, especially in the early stages. When it comes to setting your own salary, there isn’t a one-size-fits-all answer, as it really depends on your business’s revenue, expenses, and your personal financial needs.
Many business owners start by paying themselves a modest monthly salary or a percentage of the profits—typically anywhere from 10% to 50%, depending on how well the business is doing and how much you need to sustain yourself personally.
Here are a few tips you might find helpful:
Evaluate your financials: Review your monthly income and expenses closely. This will help you determine what percentage you can comfortably pay yourself without jeopardizing the business’s cash flow.
Set aside for taxes: As you mentioned, it’s a good practice to save a percentage of your income for taxes—40% is a common rule of thumb, but this may vary based on your tax situation.
Frequency of payment: Many business owners pay themselves monthly or bi-weekly. Choose a frequency that aligns well with your personal budget and business cash flow.
Leave a buffer: It’s smart to keep a cushion in your business account for unexpected expenses or opportunities. Having a financial buffer can give you peace of mind.
Consider your long-term goals: Think about how much you want to reinvest in your business for growth versus how much income you personally need.
Ultimately, pay yourself what feels balanced for both your business needs and your personal financial situation. It’s always a good idea to consult with a financial advisor or accountant, especially as your business grows. Good luck, and keep up the great work!