When creating a budget for their small business, entrepreneurs are tasked with a number of challenges, including projecting potential investments and developing an affordable marketing strategy. But perhaps the most difficult part for entrepreneurs when forming a small business budget is determining their own salary. When figuring out how much to pay themselves, small business owners have a lot to consider. Do the prospects for their business look promising, allowing them to take home more pay? Or do they want to play things safe, and take home a smaller paycheck?

Budget before launching

Every smart entrepreneur knows he or she should have back up funds available in case progress doesn’t happen as quickly as expected. Keeping that in mind, before starting a small business, new business owners should have enough saved to cover living expenses for roughly two years, Lori Hoberman, chairwoman of emerging companies/venture capital practice at Chadbourne & Parke, told Entrepreneur magazine.

By having money saved up to cover living expenses, entrepreneurs will be able to make it through the periods – typically during the initial startup phase – in which they may have to forgo a salary.

"If they can live on peanut butter and jelly sandwiches or baloney sandwiches until the big promise comes in and they can make their gazillion dollars, all the better for them,” Harry Schum, senior consultant with Compensation Resources, told the magazine.

Budget after investments

After a firm has been around for a while and a buzz has developed around the company, investment dollars may come flying in. When these investments become part of a small business budget, entrepreneurs will be able to pay themselves more without taking away from their company. However, the region in which a small business launches can affect the owner's salary. Hoberman said in places such as Silicon Valley, an entrepreneur's salary, in most cases, will be smaller than if he or she launched the business in New York.

"Don't be a piggy about it," Hoberman told the magazine. "Figure out what you need. Build in a little bit of cushion."

Being patient and allowing the business to flourish without taking a salary at the outset can often create opportunities for small business owners to bring in the big bucks once their business begins to bring in large amounts of revenue. By using financial forecasting software, entrepreneurs can easily see the projected revenue of their business, which will give them greater insights into their future salary, as well as the capital they will have for other aspects of their business.

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