I wasn’t planning on giving myself a salary because this is my side business and would just take the gross profit as my earnings. A friend of mine said I should give myself a “salary” under costs, just like any other business. Is that necessary?
@quad Yea include it as a cost and include it into your pricing structure. Imagine that you are paying someone to do what you do, how much would that cost? One day when you grow you will hire people and that will be an actual cost.
@quad I made the mistake of not incorporating my labor cost into the pricing for years. I treated the e-commerce business as a hobby on the side that was just a bit of extra income. When it came time to turn the hobby into a full time job that was one of the first things that I realized; I couldn't afford to hire anyone to work so I had to raise my prices.
As for your profit loss projections it depends what they're for and what your personal economic situation is. If you're trying to get money from a bank the cheaper your labor the higher the profits and the more money you can get. If you want to see how much you can grow the company I would put the minimum amount you need to spend personally (don't forget taxes in that calculation) to survive and how much left you can feed the company to grow to see if you can really afford to get the company up and running.
@quad I want to say the break even point is around $30k net revenue. To pay yourself a salary you need to pay for an S Corp and a payroll provider, BUT you can also split your pay into salary/owner dividend and get slightly more favorable tax treatment.
