posted
I have been coming here for quite some time and reading and learning all I can about the sign business as I am getting ready to buy my first plotter. I have seen posts about shop rates etc, but was wondering how do you decide on what to pay yourself? Is it a percentage of sales or do you set a hourly rate, I've seen shop rates of $60.00 but I wouldn't think that's what they take in as personal income. I've also seen posts where someone paid themselves $7.00 per hour.
Can someone point me in the right direction?
Thanks! Tony B
------------------ Tony Broussard
Best advise received: Don't take any wooden nickels......if you do...burn'em!
REMEMBER THIS: Always pay yourself first! We have set a fixed amount (our preplanned amount to live on) to pay ourselves each week. We make sure our employees are paid first, then ourselves, then rent, utilities, etc. Some weeks we work for minimum wage it seems, if you figure the hours we put in versus what we pay ourselves. We ALWAYS put money in a reserve fund, especially throughout the spring to fall months (more prosperous) to cover ourselves in the slower winter months. Hope this will help.
------------------ Eddie Kitchens Signs, Etc / Pro Comp Motorsports Grafix Atoka, TN EKitchens@aol.com
Posts: 30 | From: Drummonds, TN, USA | Registered: Jan 2001
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posted
I don't always have the luxery of taking a cheque weekly, but I do try and charge approx. $50.00 per (depends on what I'm working on)
Of coarse I don't actually get this in my pocket, but if I stick to a base of $50.00 then every couple of weeks I can take a decent amount of money.
I think it will depend on how much work you have to start with. If your just getting started...unfortunatly it might be a while before you actually get to take a pay cheque at all....
------------------ Brenda Beaupit Classic Graphics Kemptville, Ont CANADA
Posts: 346 | From: Stittsville, ON | Registered: Dec 1998
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I think everybody in business for themselves learns very quickly that they only get to keep what is left over after ALL the bills have been paid. This includes everything and everybody including the tax man.
When folks ask me for advise on what to charge, I ask them to tell me how much they are worth. Given this number, at least triple or quadruple it (depending on your overhead) for your shop rate. This will help to cover unbillable items and time. It sounds like a lot, but believe me, it disappears in a hurry.
We like to take a weekly wage. With our years of experience it isn't low any more. But when things get slow, it is either draw from the reserve fund or put money BACK INTO the company to keep things afloat.
The most important thing is to stay current with your suppliers and especially the tax man. Otherwise you must learn to like macaroni and cheese, because it will be all you can afford for a long while.
Been there done that. Learn from our experience.
-dan
------------------ Dan Sawatzky Sawatzky's Imagination Corporation Cultus Lake , British Columbia dan@imaginationcorporation.ca
the three basic things that decide what to pay yourself is cash flow, cash flow, cash flow.
You must pay your employees first, payroll taxes, income tax, property tax second. Landlord third, suppliers last. If you are lucky enough to have money left over pay yourself.
How is your company organized? sole propriator, or "S" corporation. If you choose to be an "S" corp than the folks at the IRS like to see a salary comparable to other "executives".
You must remember to budget for income tax as well as self employment tax. Also you need liability insurance, workers compensation, and equipment insurance.
I believe most businesses fail because the owners don't understand the complexities of the above.
Now I'm wondering how we do it.
Good Luck,
Jim Mulligan
------------------ Jim Mulligan Cardinal Manufacturing, Inc. Indianapolis, IN
Posts: 121 | From: Indianapolis, IN | Registered: Feb 2001
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We have the luxury of having no employees (and will remain that way)our shop rate(with just the two of us) will run from 40 to 60 an hour depending on the task.We maintain the lowest possible overhead we can accomplish,pay all suppliers up front,lay back 20 % in savings for taxes and hard times(it always covers it)and live off the high or low profits that accumulate. In otherwords "if it aint there you can't have it".Not everyone can live this way but it's the norm for us and we do quite well with it.The real trick is to make as much as you can, be a pauper when tax time comes and still be able to convince the bank you have the capability of borrowing enough money to build a new shop (which is what we are currently in the process of doing, so far they believe us)More on that later.
P.S. I know your looking for a dollar amount but how can we come up with one,everyones circumstances are different (home based,storefront,mobile,corporate,individual proprietorship...and more)So I'll pass on the most important piece of advice I ever recieved... "Never spend more in a day than you took in". Do that and the rest is easy!
"Werks fer me it'll werk fer you" Good Luck!
------------------ Monte Jumper SIGNLanguage/Norman.Okla.
[This message has been edited by Monte Jumper (edited February 11, 2001).]
posted
Tony, not to discourage you but this is something you will soon learn.
The govt. will stand in your way all year long, try to keep you from success, then (if your lucky) when you beat all the odds and stay in buiss., with a little profit. The govt. comes along and wants to share what you fought them so hard for !!!
Roger
------------------ Roger Bailey Rapid Tac Incorporated Waikoloa, Hawaii
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I know I'm not doing this part right, however what I make a year determines what my business clears after all the bills have been paid.
I leave my funds in my biz account. I spend what I need, referring many reciepts to biz expenses, the rest is personal.
My bookeeper always shakes her finger at me and tells me to draw a wage so the banks can rate what I earn, however my accountant says that doesn't really matter, it's the amount at the end of the year that determines what you make.
So as it stands, I spend as I need it only. I pay my rent when due, suppliers within 30 days, Visa within 30 days, small things right away, and personal usually right away. I contribute to retirement funds to nearly the max, pay my work and truck insurance by the month, and property taxes I tuck away each month so I have the amount there at tax time. If my bank account is generous at any given time, I then draw regularly and dump it into my personal account.
I'd say, if I drew a regular wage on just what I needed to spend, I'd pull out about $2k a month. The rest I would continue to invest in my company or start buying cool things 'work related.'
posted
The first 5 years I was in business, I spent a few weeks out of the year without getting paid at all. I saved every dime I could to go back into the business till I could build a shop and invest in new equipment. But Now we try to take a regular salary, I still don't take as much salary as my employees, but I take rent on the shop, from the corporation. It works better according to my tax man. my wife and I both take equal salary, though she doesn't do anything(LOL). which is 500 a week - US. If I have any money left at the end of the year, we all split most of it in bonuses, and save the rest for capital investments of one kind or other. Bill
------------------ Bill & Barbara Biggs Art's Sign Service, Inc. Clute, Texas, USA Home of The Great Texas Mosquito Festival Proud Third year Supporter of the Letterheads Website MailTo:twobeesusa@netscape.net
Posts: 1020 | From: Lake Jackson,Tx | Registered: Nov 1998
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I worked backwards to decide my shop rate. First, I decided how much I wanted to make a year to live comfortably (within reason), then I figured out my expenses (fixed overhead, including a figure for building and equipment maintenance and equipment and software upgrades). After subtracting my fixed yearly overhead from my desired salary, I divided this figure by the number of weeks I was willing to work a year (49). Then, I divided this figure by twenty (since this is the number I calculated would be my weekly billable hours) to come up with my hourly shop rate.
------------------ Tim Whitcher Quality Signs & Design 107 E Adrian St Blissfield, MI 49228 qualitysigns@cass.net
Posts: 1546 | From: Adrian, MI | Registered: Mar 1999
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posted
My situation is perhaps different than someone who is just starting out. Being established over 20 years and working out of my home, my CPA suggested that I incorporate. The purpose is mostly tax related. I take a relatively small salary, pay myself a large rent for the use of the shop that I own, and take profit sharing for the rest. It works out to be about 1/3 each. The advantage is that only the salary is subject to SS tax. The rental income and profit sharing is not. That saves over 15% in taxes on 2/3 of your income. You have to be careful and not take too low a salary, the IRS expects you to be around an industry average. Rent must also be compariable to what you would pay locally. Hey! my office space is like Clintons NY digs!
------------------ Carper's Signs 594 Union School Rd. Mount Joy, PA 17552 carpersign@desupernet.net
Posts: 157 | From: Lancaster, PA, USA | Registered: Aug 1999
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