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One of the hardest things to do in a start-up is to determine the business owner’s salary. It’s a big question of concern, and one most entrepreneurs rarely consider. A quick google search will net you millions of articles giving a wide range of ideas. Starting a business in most industries requires you to structure your pay early in the process. In the green industry, though, it’s easier to start as the only employee, which means learning to separate your funds from your company’s. So, how do you determine a business owner’s salary?

Start Small

The average small business owner’s salary in the United States is $59,000 per year. That average varies from just under $30,000 up to over $160,000 included bonuses and commissions. While there’s no secret formula that will give you a magic number, there are some critical factors to consider.

Early in your company’s life, the most significant factor to consider is your personal economic needs. If you don’t set aside enough for you to survive, your company won’t survive either. The easiest way to do this is to pay yourself a set salary. Add up your living expenses per month and then multiply that by 12. Doing so gives you a base starting salary that you have to make.

Many articles prescribe to the use of a percentage-based salary. Using this type of formula can get you into trouble quickly. Taking a blind 30% of your companies profits might leave you without enough to live on or be too much for your early start-up to survive. We advise you to avoid this and stick to a set salary.

Next, take a look at similar-sized companies in your area and industry to see what their average business owner’s salary is. In places like Los Angeles or New York City, average salaries can push $80,000 because of the cost of living. In more rural areas, you should expect much less. Consider your experience in your industry and how much you’d expect to be paid if you worked for another company. All these can help you get a better picture of what you should initially pay yourself.

Business Owner Salary Should Be Reviewed Often

Starting with a smaller salary can help put more capital back into your company. Before you start a lawn care business, it’s best to create a comprehensive business plan. A business plan is useful to lay out a detailed look to ensure your business can be successful, keep your vision on track, and leverage if you need financial backing. Your business plan should include your salary expectations to start with and why you think that salary fits.

Paying yourself just enough to survive in the short term allows you to grow your business more quickly. This extra capital can be used to add more or improved equipment, hiring employees, or creating a solid marketing plan. The first five years of a start-up business are the most crucial. Spending capital wisely can increase the odds of your lawn care company surviving.

Just like your business plan, your salary should be reviewed often. Your business needs will change rapidly, especially when you first get started. The best time for that first review is after six months of business. Review your business plan to see how your actual results are comparing to your projected growth. Are you on track to meet your goals, or have you reached them early?

If you’re ahead of the curve, you’ll have the option to redo your salary based on your actual sales. Continuing to put as much money back into the company as you can will help ensure you will maintain growth, so don’t just give yourself a raise because you can. Some business structures, like Partnerships and Corporations, can dictate how much of the company’s profits you’re able to receive as a salary, so be sure you follow those rules. Reviewing your business plan and pay every six months to a year after this will keep you on track.

Master Job Costing As A Skill

Job costing is one of the most important skills you can develop as a lawn care business owner. Simply put, job costing tracks the costs and revenues, which enables standardized reporting of profitability by the job. The time it takes you to complete a task depends on who’s doing it and with what equipment. It’s hard to estimate that at first, but each year you should look back to understand where you’re profiting the most. Some customers might actually be costing you money.

Understanding your job costing can help you eliminate drainers from your bottom line profit. Using lawn care management software like CLIPitc can make that process simple. CLIPitc’s job costing report can show you where you’re making the most profit with a few easy clicks. Using the newly released phone application gives your crews the ability to record their jobs in real-time while out in the field, which will help eliminate any errors.

Once you understand your business and where you’re most profitable, you can streamline your pricing and decide what services you want to concentrate on the most. This deeper understanding can ultimately help you revise your salary again at the end of your first year in business.

If you’re looking for a magic formula to tell you how much a business owner’s salary should be, unfortunately, there isn’t one. Every company and every region is different. Building a solid business plan, starting yourself out small until you see your growth, and understanding where you’re profitable with job costing will allow you to ultimately settle on the appropriate salary for you. Remember to review your salary often so you can grow along with your company.