Some small business owners that I have talked to have a hard time telling the difference between profit and salary.
Owners take a draw from the company, so they don’t really understand how much they made until the end of the year. But for accounting purposes, you should always include a salary for the owner.
According to this article a good place to start is with the “average” small landscaping business. The average business owner makes about $59,000 a year on a $590,000 in gross revenues business. That’s about 10% of gross sales that goes into the owner’s salary.
The article also says that in smaller businesses (under 500k in gross sales) the owner’s salary is about 30% of gross revenue. So on a $100,000 business that would be about $30,000. How do you measure up? Are you paying yourself a fair wage in your small business, or are you under that?
Check out the article, it has a lot of really good advice, and is packed with business statistics that can help you accurately measure your salary compared to the industry.