# How to pay myself



## robbyk616 (Nov 25, 2010)

Hello all,

I've been screenprinting for a few years & just last month started a screenprinting business of my own. We (my girlfriend and I) already have a few clients & I'm in the process of writing a business plan to obtain funding to get into a shop (right now I'm printing & running the biz out of my home). 

My question is, if i want to pay myself $2,000 per month, do I ask for this in my loan request??? That way I can take an "owner draw" from the loan amount each month to guarantee I get paid. This means my loan request from the lender will be upwards of $60,000 for the year ($20,00-$30,000 in salaries, $10,000 equip. upgrade, $7,000 facility rent, supplies, etc.) which seems like A TON OF MONEY to be asking for... (or is it?)

Or alternatively, should I just write in my business plan that I will pay myself modestly w/the revenue we bring in as we grow... which means I'll only have to request a $20,000 (which seems much more likely I'd be qualified and granted... and i'll sleep better being 20k in debt opposed to 60k) does this make sense???

Background info: 28 yrs. old, credit score is mid 700's, pretty good personal financial history, solid business model niche, etc. 

Please, anyone whose written this plan (or something similar) should know where I'm coming from... any help is MUCH appreciated. Which seems the better option? Is there an alternative that I haven't even considered? Thanks Thanks Thanks!!!! 

Rob


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## gotshirtz001 (Sep 23, 2008)

I believe it will depend on how the business is being set up... (Sole prop, LLC, Corp...)

If you are a Sole Prop, then the profit/loss from the business is completely yours. If you incorporate to any degree (and become an employee of the entity you've created), then you could reasonable state what you intent to pay yourself... however, without two years of validated income, approval for a loan may be tough.

I would say to generate a strong customer base and establish a local presence before you move into a shop... A store front only guarantees increased overhead.

You should really only upgrade when you can honestly say that the system you have currently is consistently losing money for you.


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## gruntstyle (Aug 11, 2009)

I've been in business for a little over a year now and I'm starting to finally pay my self. I want a salary, but I know that businesses owners sometimes don't have that luxury. So this is how I figured it: I'm just going to pay my self a commission of every wholesale account that I set up with a retailer. This makes it easy for my company to afford and still gives me the drive to expand my company so I can get paid properly.


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## jiarby (Feb 8, 2007)

I dont think I would talk alot about how you want to live off the fat of your loan proceeds....

Investors want to hear that the money they provide goes 100% into building the business rather than into your pocket. 

You can list salaries and labor as expense items in your business plan, just like rent & electricity, but focus on sales, marketing, and profitablilty. 

They do not want to loan you money so you can pay yourself a wage for the next 6 months while you run the business into the ground. 

Borrow the minimum you need to execute your business plan sucessfully.

It sounds like you want to borrow 60k to rent a space, then pay yourself a wage, and only spend 10k on capital investment (equipment). 

So, after a year, the investor is going to have $10k worth of used screen printing equipment (that he probably can't sell for 50%) and not a whole lot else. If you fail then he is holding the bag for 50k+ while you just file chapter 7 and get a job at Kinkos. 


I would like to read the business plan that makes this sound like a good investment. What are you putting up?


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## thutch15 (Sep 8, 2008)

Don't borrow.. start small and answer to your customer not your loans. Just my opinion. 

As for paying yourself if you are quoting jobs correctly then it should be built into each job. Each job should cover 100% of the variable/direct cost and a portion of the fixed cost.


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## jiarby (Feb 8, 2007)

whatever you do do not build a business plan so that the business is only profitable if you dont get paid. 
(ie... no salary/wage for the operator) 

If the business is going to be successful it has to stand on it's own two feet. Your pricing has to be based on all your costs: overhead, cost of goods sold, labor, taxes, and PROFIT. You shoud see the bank balance getting bigger every month. When it gets so big you can't stand it then take a draw, but as little as possible! 

What happens is that a new business cuts prices to win the job, and clears a small margin over the COGS... BUT loses money overall if you consider having to pay someone to do the work. A year from now you will find that you are doing $15k a month in business but going broke. You are busy but not making money. You then want to hire help but can't afford to pay an additional salary. Bad business plan! 

Budget as if you were going to hire a minimum wage employee to work 40hrs a week. Then pay ALL your bills for the month in full (no carrying credit card balances for materials & supplies), pay your loan installment, pay your taxes, then - IF there is money left- pay yourself from this pool of min wage salary. 
Excess money after all that is PROFIT. Bank it! Put it in savings, buy a certificate of deposit, just don't spend it! 

When you can do this for months on end and see the profit balance getting bigger & bigger THEN you can decide what to do with the money... pay off the loan and increase your monthly cash flow? Hire a new employee and double sales & production? Buy a new tool to increase efficiency? Reinvest in something that makes you more money. Get your money working for you. The last thing you should do is pay yourself. Every dollar you take from the business drains the lifeblood it needs to keep going.


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## VTG (Dec 16, 2010)

Rob, I applaud you for attempting to write a business plan, every good business should have one, especially during the start-up phase. I'd caution you, however, on rushing into this and then rushing out to secure a loan (of any size).

Take your time. Write your plan first. Make sure that it makes complete sense from top to bottom. It doesn't have to be fancy or complex, but you do have to make sure that you are creating a sustainable business model (one that will hopefully provide you with a decent salary someday).

Make sure you have a clearly defined marketing strategy and a clearly defined sales strategy. Make sure you fully understand your estimated monthly expenses and your anticipated monthly sales (you may have these numbers in your head, but it helps to put it in writing to see where you might actually net out each month). You'll find that there are more monthly expenses than just your salary, rent, and equipment/supplies. Once you do this exercise, you may come to the realization that opening a shop right away is not necessarily the best option (the overhead can kill a business before it even gets off the ground). However, if your plan is strong enough, and you are comfortable with your projections, you may be able to go for it. Just take your time before you make any decisions (and try to avoid borrowing any money if possible).

I hope I don't come across as being negative. I always root for small businesses. I just hate to see anyone rush into this business thinking that they can make money just because they know how to screen print. You have to know how to run a successful business ... or you have to be willing to learn how to run a business on-the-fly (which is twice as hard and twice as risky). One of the reasons why so many start-ups fail, is because the person who starts the business fails to recognize that there is much more to it than just decorating garments. 

Either way, I wish you good luck.


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## robbyk616 (Nov 25, 2010)

Wow. Thank you all for your insight and the wealth of knowledge & personal testimony. 

I think I'll try to get into a super small shop ($500-$600/mo) to give my company some credibility, a modest storefront & a little breathing room. It sounds like getting a substantial loan is out of the question... perhaps i'll acquire a small line of credit, or get a small loan when I absolutely need to upgrade equipment--and in the meantime keep living expenses low & live off a tiny slice of my revenue--investing most of it back into the business. I expect Spring, Summer, Fall to bring in more work than I'm seeing now. 

I'm a smart guy. I won't be too hasty w/anything... and that's why I'm seeking the wisdom of those who've been down this road. Thanks again to all of you... any other recommendations will be much appreciated.

Looks like it's bootstraps from here on out! 

Rob


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## paquetten (Sep 13, 2010)

You will have to be doing a lot of business to pay yourself $2000 per month. Your salary should be based on your businesses net income (total revenue minus cost of goods and expenses). Maybe start smaller, all business owners do.


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