MORE FROM YOUR FINANCIAL MENTOR NEWS:
As a business owner, how much should you pay yourself?
Domino's CEO Don Meij has come in as the highest paid CEO in Australia. This is despite his share price tanking and widespread wage fraud in the Domino's empire being part of the reason there's a royal commission into the franchising sector. There's a lot more to Don's remuneration story, but we've gotta ask the question, as a business owner, how do you take money out of your business?
Ask Simple Questions
Well, out first tip is to stick away from the finances. Ask simple questions. Are people involved in my business happy? Are my customers happy, my shareholders, my staff happy? Then finally am I getting what I need out of the business?
If everybody's happy in the business then you've kind of got a good indication that you don't need to reinvest your surplus cash in research and development or innovation projects to get those people back up to the place where you need them to be.
Are you planning to sell?
The second thing to consider is what are the goals of the business? Taking money out of the business to fund your lifestyle sometimes isn't seen as as good thing if you're planning to sell your business to potential investors. Potential buyers will want to know that you're putting the business interests ahead of your own.
Taking money out when the business can't afford it or has other uses for that cash is generally not a good look. If you do choose to take money out of the business you need to think how you're going to do it.
Increase in salary, bonuses, or putting some expenses through the business that may be triggered by FBT are all options available to you, but be warned, there's plenty of high profile people who have come undone, caused massive brand damage, and personal reputation damage by being caught putting non-business expenses through their business.
If you have surplus cash that's a sign things are going well in your business. Check out our guide to help manage your business growth.