How much should you pay yourself?

Being the boss of your business gives you the authority to make crucial decisions, including determining your own compensation through wages, salary, or drawings.

As an owner, especially in the early stages of building your business, you may need to consider underpaying yourself in order to reinvest profits back into the company's growth. However, it's crucial to strike a balance between reinvestment and personal financial needs.

When deciding your pay, here are some key questions to consider:

1. What Can the Business Afford? - It's essential to ensure that your business has enough cash to cover its operating expenses, basic costs, and tax obligations. Once these expenses are accounted for, you can determine a reasonable salary that leaves the business financially stable.

2. What's the Market Rate for Your Role? - Evaluate what someone with your qualifications and experience would typically earn for performing similar tasks in your industry. This market rate serves as a valuable reference point when setting your own compensation.

3. Could Reinvesting Profits Accelerate Your Income Growth? - While you can choose to take all the profits as income, consider whether reinvesting some of those profits could lead to faster business growth and ultimately result in higher income in the long term. Investments in areas like advertising, website improvement, or expanding your offerings can yield substantial returns.

Our team can assist you in calculating how much your business can comfortably afford to pay you, analyse the potential benefits of reinvesting profits, and help you evaluate the advantages and disadvantages of hiring additional assistance.

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