How Much Money Should You Pay Yourself During the First Year of Your HVAC Business?
So you’ve decided to start your very own HVAC business and you’re beginning to make sales. What kind of salary should you pay yourself? Nth Zone Master Guide Kelley McKay has the answer.
Why It’s Important to Pay Yourself
If you work for less than what you deserve for long periods of time, it’s easy to develop a negative attitude towards what you do. There must be a fair exchange for the effort you put into your business and the value you provide for your customers.
If a fair exchange exists where customers value your effort and you charge enough for that effort, you can earn what you’re worth. And when you earn what you’re worth, you will have the fuel to continue your business journey.
You have to charge enough, sell enough and pay yourself enough to make all of the risks, efforts and challenges worth it in order for you to continue to build your business.
So what salary should you pay yourself during that first year? Kelley says $100,000 is the number he and many other business owners he’s spoken to would like to earn in their first year of operation for all the risks they take, and debt they acquire.
Three Things You Should Consider When Thinking About Your Salary
- You must act “as if” you already have all of the things you will need to pay for, because if growth is your objective, you eventually will have to pay for those things. For example, if you are answering your phone 24/7, figure out what you would need to pay someone to answer those calls for you. Determine what that number is and pay yourself that amount instead.
- In the beginning it would be wise to take everything you earn and reinvest that money back into the business. We have to look at the business as a long term asset that will pay off big time in the future – in money, time and freedom. In order to fund that growth and build that asset, you can borrow from a bank or investor, or you can fund it yourself by taking less than the $100K salary in the early, lean years. The choice is ultimately yours and it’s based on your preferences on how you will use your business as your wealth vehicle.
- Consider paying yourself a modest salary and take an owner’s draw from the profits. Be sure to speak with your accountant before doing this. Your number one job is to do whatever you can to earn a profit in your business. And those profits are yours. Just be aware that profits on an income statement are very different than cash on hand in the bank.
The Choice is Yours
In closing, it really depends on what you want your business to do for you financially and how fast. If you have a great reputation and work ethic, you can earn a tremendous amount of money operating lean and taking money out of your business. If a big payout later in life or passing your business down to a family member is more appealing to you, then consider taking less and investing into your business as a long-term asset. Eventually the money will still come, but you won’t have to be the only person earning it. The decision is yours.
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