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CARMandP

Personal Owner Pay? How do you figure?

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I am reworking my budget in the shop to figure out how I can make a little more money in the shop. How do you guys figure your own pay? Is it taken out of the labor cost? Parts markup? or an overall profit?

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That's a tough question because it depends how profitable the business is and what the sales are. And, I am not talking about size. Many 2 or 3 bay shops are more productive than 8-bay shops and the profits are better. I have known small independents that earn salaries far better than larger, unproductive shops.

 

The key thing to know is breakeven. Once you know what all the costs are, you need to factor all the other things in life that you either need or want. For example, your home mortgage, family vacations, education for children and retirement. You add all those things on top of the breakeven number along with a return on investment.

 

So, you need to sit down, analyze your business, figure what you need in life and factor in your return on investment...that becomes your salary.

 

Hopes this helps...

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If you have been in business for awhile, you know what your net profit margin is, so I would use this as my guide. Depending what your type of business formation, you can save fica, futa, suta fees by taking anything over your set salary as dividends. You must use a salary that is similar to someone in your position (manager). You must be a LLC or Corporation (S or C corp).

 

Example: your net profit is $150K and a shop manager in your area makes about $50K. You set your salary at 50K and at the end of the year, you

take a 100K dividend. You only pay FICA, SUTA, FUTA based on the 50K and save the the other fees.

 

Also, giving yourself a regular salary doesn't necessary make you more money, but it gives you a more accurate picture of your business. Are you really

making more money by being self-employed or are you just buying yourself a job with a lot of headaches.

 

Not sure if this answers any of your questions.

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