Estimate a reasonable small business salary by comparing your profits and expenses.
The freedom and authority of becoming self-employed can be quite rewarding for new business owners. However, as a small business owner you will no longer have an employer calculating your payroll and handling your benefits, nor is there anyone paying the company expenses; that's your job now. In order to keep a balanced company budget and maintain a fair and profitable amount of take-home pay, you need to know calculate your salary for a small business.
Instructions
1. Compare salary ranges related to your position in the business to establish reasonable pay expectations. If you are uncertain of what a feasible salary for your position would be, refer to employment information resource websites such as the U.S. Department of Labor Statistics, SimplyHired or PayScale. Review job descriptions that closely match your position to find current high, low, median range salaries in your location.
2. Estimate your company expenses and overheads to determine your operational costs. Add up all of the expenses associated with running your business, providing services and producing products. This may include rent, utility bills, business insurance, employee payroll, supplies, manufacturing materials, travel expenses and outside services such as legal assistance or janitorial services.
3. Subtract the amount of expenses from your total company revenue, or gross profit. Calculate what your total net sales revenue would be for a specified period -- yearly, quarterly or monthly. Include all monies received from product sales, services, shipping and sales tax within that period to determine your gross profit. Deduct your expenses from your gross profit; the balance is your net profit.
4. Compare your desired amount of wages to your net profits. If your net profits exceed your desired amount of salary during the specified period, you will likely earn the highest average salary for your position. Otherwise -- depending on your particular scenario -- you may have to adjust your pay to a median or lower rate. The amount of salary you decide upon is considered your gross wages, or gross pay.
5. Subtract all applicable pay deductions to determine your net salary. Your net salary is the actual amount of cash in your pocket once all required deductions have been allocated. Add up all the taxes, health insurance, and retirement or 401k deductions that apply to your position and subtract that sum from your gross pay amount. The sum you achieve is your net salary.
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