How Much to Pay Yourself

What’s a fair salary for the work you do? How much should you be rewarded for the risks you take as an owner? The Remodelers Compensation Study, now available from the NAHB, can help you answer those sticky questions.

February 28, 2002

 

What’s a fair salary for the work you do? How much should you be rewarded for the risks you take as an owner? The Remodelers Compensation Study, now available from the NAHB, can help you answer those sticky questions.

The study shows that the average total compensation (salary plus bonus) in 2000 for owners of companies with annual sales from $500,000 to $999,999 was $85,593, or an average of 12% of volume; from $1 million to $1,999,999 was $112,381, or an average of 8% of volume; and $2 million or more was $182,770, or an average of 7% of volume.

While these numbers provide a valuable guideline, Steve Maltzman, CPA, says the best way to determine a fair salary is to ask yourself what you would pay someone else for the work you do for your company.

"The cardinal sin many remodelers make is taking money out of the business rather than building a salary into their budgets," says Maltzman, whose Redlands, Calif., firm, Builder Accounting Services, handles financial management for builders and remodelers.

In the NAHB study, only 33% of remodelers with firms doing less than $250,000 drew a regular paycheck; that jumped to 87-88% for firms doing $500,000 to $1.9 million, and 96% for firms doing $2 million-plus.

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