Owner’s Salary v. Profit

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I had this conversation again.

The owner’s salary is not profit. And the owner’s salary shouldn’t come out of profit.

If the owner works in the field, her salary comes from the cost of sales just like any other crew person. If she works in the office, her salary is built into the overhead, just like the person who answers the phone.

This salary is a cost of doing business. If the owner wasn’t there, she’d have to pay someone else to the work. That salary wouldn’t be profit, and the owner’s salary isn’t either.

Profit is what is left after you’ve covered all of the expenses, including the owner’s fair market salary. (Yes, if you want, you can then pull that profit out of the business and buy yourself a boat. Good on ya!)

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About the Author:

Mike Rogers is the President of OmStout Consulting. A nationally recognized expert in residential energy-efficiency, he works with contractors and programs to scale sustainable market approaches to improving homes. More on Google+

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