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When to Take a Salary

Marc Lawn Thursday, 16 September 2010 Written by  Marc Lawn

Category Finance

When should you take a salary from your business? So you are in business, the venture is just about starting to turn a profit, you have ploughed blood, sweat and tears in to it....now shall I start taking a salary and getting my ‘dough’ back? As Marcela asks in her post of 8th April, when should you take that salary?

I mean even the Joker said it in The Dark Knight, ‘If you’re good at something, never do it for free’. We know what became of The Joker, so when does it make sense to start taking something back?

 

Like many things in business, timing is everything. There are many temptations to start drawing that cash as soon as there is a surplus; after all you have put everything in to it to this point. Suddenly, you then realise there is no surplus money to invest back in the business so you end up putting your money in again, and after all business needs consistency. Owain and Dominic said that only 24 hours before Marcela’s question was posed.

However, this is not the only potential pitfall. Tax efficiencies can be gained by making the right decisions at this point so you need expert advice - don’t be ruled by your own emotion to see the ‘fruits of your labour’. More importantly, you have a duty to ensure that your business is sustainable - have you considered the impacts of the reduced cash, and ‘fixed’ costs? Will it affect potential investment, lending or even cash-flow?

So many things to consider, so many decisions to make, there is not a single easy answer as every business is different. Personally, I would always look to ensure that I have a sustainable business first...you may consider other things as critical but, whatever they may be, ensure you heed The Joker's comments: "I like this job – I love it!"

That should always guide you as an entrepreneur.

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