Q: I am starting a professional services firm. How do I determine how much salary to pay myself? --S.H., ClevelandA: When calculating your salary, you'll need to consider a range of factors: the age of your business, sales and profits, the industry you are in, and where you're based. Try to get a sense of what people in similar circumstances make. Aspen Publishers Inc. (www.aspenpublishers.com) and Western Management Group (www.wmgnet.com) publish yearly compensation reports, though they're pricey--from $475 to $675. Free information is available at places like Salary.com and our own Web site at smallbiz.businessweek.com.
In general, it is rare for a business owner with outside investors to take home more than 50% of the profits. Two exceptions are sole proprietors and owners of S-corporations, who often take as much as 100%. Owners of startups tend to take low salaries, or none at all; after all, you're still building your business. It's a sacrifice, but one that could pay off in the long term. By Karen E. Klein