How do you know how much to pay yourself

[cove]

I have an online business. My goal eventually is to get my own brick and mortar store. Right now I make about $100-$200 profit and sell about $6-7,000 worth of goods a month. How will I know when I am ready to make the leap? Also how do people when they start their own store. For example there is a local pet shop that has a lot of inventory by my house. How do they know how much to pay themselves when the busines starts and how much to pay employees? when they don't even know how much business they are going to generate... Thanks

[Comtrad]

You only make $200 profit off of $7000?!?

[JWDesignCenter]

I'm hoping that was a typo... cuz there's definitely something wrong if you're only making 100 - 200 in profit.

[TeamGopher]

Hi Cove,

You could make a business plan and then you would know what your expenses would be. What is left over is what you pay you

[SethTM]

Talk to an accountant.

Also, if that is your profit margin you might consider raising your prices/lowering your costs.

[EtherLotus]

im not the person to ask for business advice.. but wouldnt you add up all of your cost.. and whatever is left, is yours?

maybe im wrong.

[Stang]

I couldn't disagree more with those that say "whatever is leftover is yours". Running a business in this manner is akin to gambling. If you want to be successful you need to plan. You need to have a business plan and a cash flow forecast. When you are determining your expenses you should factor in YOUR salary as an expense of the business! You are an employee of the business are you not? You work in and on the business. How much you ask? That is to be determined by a feasibility analysis. How much time and effort are to be devoted to the business? How much would it cost you to replace yourself with another person? ALSO, when pricing your goods or services you should further add in a profit margin after all expenses (including your salary) are figured. Yes, you are entilted to TWO draws from the business. One, your salary and two, the profit of the business which you own. If you only settle for one of the two returns you are cheating yourself and could be just "buying yourself a job". Running a business requires commitment over and above that of a job and thus, requires proper compensation.

[JWDesignCenter]

Yea, I add up the costs I have to pay, plus hold 20% for taxes, and another 30% or so to put away for the business itself. This way, come tax time, I'm not scrambling to make enough, and the business can pay for it's expenses without having to dip into my funds.

[cove]

Originally Posted by JWDesignCenter

I'm hoping that was a typo... cuz there's definitely something wrong if you're only making 100 - 200 in profit.

no its not wrong. I am putting a lot of the profit I make back into CPC advertising for more sales. I spend about $1500 a month in advertising. I mark my prices up about 20%. I relaly make $2,000 profit but put most of it into CPC advertising. I'm new so I am trying to get my name out there. If I sell $7,000 how much profit should I be making?

[Comtrad]

Originally Posted by cove

no its not wrong. I am putting a lot of the profit I make back into CPC advertising for more sales. I spend about $1500 a month in advertising. I mark my prices up about 20%. I relaly make $2,000 profit but put most of it into CPC advertising. I'm new so I am trying to get my name out there. If I sell $7,000 how much profit should I be making?

It depends on how much room you have to play with your markups. What do other people sell it at? 20% doesn't seem high enough to me though. 20% to us is the lowest we like to go. We average about a 45% markup with some items going all the way up to 85% markup.