Question # 17: How much should I pay myself?
Let me begin with one clear point: you should pay yourself from day 1 of your business.
Before you write me off as silly, let me say this: entrepreneurs are brave, resourceful, hard working, and determined individuals. Small business is the backbone of the US economy providing food on the table for a significant percentage of the people in the US.
According to Forbes Magazine, "Small businesses employ 58.9 million people, which makes up 47.5% of the country’s total employee workforce." If every person is in a family of 2, the number of people who depend on the employee is 117.8 million.
What percentage of new jobs come from small businesses?
New businesses account for almost all net new job creation.
New businesses account for nearly all net new job creation, and almost 20% of gross job creation.
How many small businesses employ people?
6.04 million small businesses have employees, meaning 20% of all small businesses have at least one paid employee. Small businesses comprise 99.7% of all firms with paid employees.
This is why we must make an effort to pay ourselves. We are a mighty group that impacts millions. People are depending on us and we need to start by running our businesses in a way that allows us to pay ourselves for our hard work.
Where should I start?
This is a tough question because it depends on a few factors. Do you make a product or provide a service? If you provide a service, strive to pay yourself between 30 to 50% of what you bring in. If you provide a product, deduct the costs of creating or procuring the product and pay yourself 20 to 50% of the margin remaining.
Note: these are rough estimates and require a bit more analysis to answer this question. If you want to discuss your business particulars and arrive at a concrete number, please set up a FREE 30 minute call with me and we can hash it out. You can book time with me at:
Let's pay ourselves and keep America working.