BENEFITS

New BusinessBENEFITS

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  • How to Figure Out Your Own Compensation

    Game Plan

    In-Depth

    Pay Yourself More Later (When the Business Can Afford It)

    AdvantagesAdvantages

    advantages

    This is a simple, reasonable, common-sense solution .

    • Flexible for the business. The business pays you more eventually, but not based on any timetable or loan.
    • Flexible for you. You leave it open how, when and how much your compensation grows.
    • Shows smart management and long-term commitment. This helps the company survive initially and shows your commitment to its long-term success.
    DisadvantagesDisadvantages

    disadvantages

    This arrangement might appear too casual and might hurt the business’s image.

    • Might look unprofessional or too casual. By not documenting a loan or making things official or having a timetable, this might seem too casual an arrangement.
    • Could create questions, or raise red flags. If the arrangement seems to loose, unprofessional or suspicious, it could invite scrutiny from investors or the IRS.
    Deciding FactorDeciding Factor

    deciding factor

    • How flexible can you be personally about finance and compensation?
    • How supportive is your spouse or partner—if you have one—in case they need to make any sacrifices?
    • How financially solid is your company?
    Game PlanGame Plan

    Game Plan

    Next steps:

    • To know how much salary you need, do a thorough and detailed monthly personal budget.
    • To know how much your company can afford to pay, do a realistic projection of your business’s income and expenses.
    • See if these calculations mesh and where you can make any sacrifices that aren’t too stringent.
    • Get help from your accountant if you need to, and learn about any tax issues surrounding compensation and salary payment terms.
    • Learn more about this and related issues at www.entrepreneur.com.
    • If married or living with a partner, discuss the implications and possible sacrifices your partner or spouse might have to make.