Setting aside money for an online or offline business is not always easy for everyone. Often we hear about the 10% rule where the first 10% of the paycheck goes into your saving s account and is not touched the other 10%, for some of us is set aside for tithing or giving to others. The rest of the money is then for us to play with. For example, after the bills are paid we might be able to enjoy reading a good book that we got from the library. So now we have graduated and are running an online business. As we look at the internet there are many business, both brick and mortar and informational, that are marketing their services. Many businesses online are very well established and others are new to the arena. But, in both regards, the income they receive is not all theirs to keep. Sounds great if it was, but there are many expenses. When running a business we need to devise a method that would work for the circumstances and business model. Make a plan to divide the money to pay the appropriate accounts.
A possible suggestion for payout from your online business income can be as follows (keep in mind that every business is different): Income = sales commission (9%) + employee salary (35%) + executive salary (3%) + company earnings (3%) + benefits (6%) + marketing (3%) + overhead costs (6%) + taxes (35%).
If you earn $10:
a. 9% sales commission = $0.90
b. 35% employee salary = $3.50
c. 3% executive salary = $0.30
d. 3% company earnings = $0.30
e. 6% company benefits = $0.60
f. 3% marketing = $0.30
g. 6% overhead costs = $0.60
h. 35% taxes = $3.50
If you earn $523:
a. 9% sales commission = $47.07
b. 35% employee salary = $183.05
c. 3% executive salary = $15.69
d. 3% company earnings = $15.69
e. 6% company benefits = $31.38
f. 3% marketing = $15.69
g. 6% overhead costs = $31.38
h. 35% taxes = $183.05
When we break down these categories the sales person will receive 9% of the income from their efforts. At $10 times 9% (0.09)) will equal 90 cents. So depending on how many hats a person is wearing in their company depends on how much they actually make in a day. A “lone-wolf” company or single person company will earn the executive salary, employee salary, and the sales salary.
Benefit income should be set-aside to pay for things like vacation time, sick days, health and life insurance, personal days, and holidays.
Company pay is for growth in the company. This 3% represents money in the bank cushion that should be set aside and never used. That healthy money in the bank growth helps you and everyone else feel good about your business.
Setting aside money for marketing is essential. If your thrifty and don’t use it then you have another savings set in place to help the company grow financially strong. The budget for marketing can always be set aside in case you need it for a really big project in a year or two that you have not even thought of yet.
Overhead expenses are our light bills, telephone, rent, new computer, paper, and other expenses that it takes to run your business.
Finally what is very important is setting aside money for taxes. A figure of 35% is only an example. Depending on circumstances you made need to increase the percentage or you may be able to decrease the percentage. Working with your business over time and with your tax advisor will get you a better idea of how much should be set aside each time you receive income to your business.
The percentages above can be easily adjusted to fit your online business income and your needs. Categories may need to be included or removed. The main thing to remember is that daily income represents 100% of all of the areas that need to be paid for your business, and planning needs to be made before the income is received to understand who gets what and how much does it really cost.