20 percent

[cchaffin]

Hey guy ,just wanted to know,

when everyone talks about 20% being a good profit Is that after you pay yourself if you are the main climber.And what is a good Rate to pay yourself.

 

[treehumper]

20% is the business' profit after all expenses. That is how it should be looked at. Paying yourself can be approached from many angles. What you would like to make, market rate for someone of your skills and experience, a lower rate to reduce taxes, etc.... Some business people will pay themselves less money and keep most assets, cars, and other personal expenses in the business if it's incorporated. A portion of the profit can be paid to you as a dividend while some is kept back as retained earnings.

Paying yourself market rate keeps your expenses in line with your competitors and will allow you to hire a climber to replace yourself when the time comes for you to grow. This way there isn't a drastic change in your costs and thus your pricing.

 

[cchaffin]

Thanks for the reply, I've realized there are alot of intelligent people on this site and it is very helpful.

 

[Jamin_Mayer]

Here is a thread on the subject.

 

[cchaffin]

Thanks for the thread

 

[mattbc]

If you are just starting out the 20% rule will really help you out.I learned the hard way and a budget that allows for working capital really helps a small guy go from "self employed" to a viable business. If you finish your year with no money in the bank you are too cheap. I was too cheap for years.