How does a business owner get money from his business?

[flyny]

Think about it...does he just take the money out the register?

Let's say I own a beauty supply store..all my stores revenue is coming from sales. So all the money we get goes to the register.

At the end of the month, that money (after being put in an account) is used to pay the workers, utilities, rent and overhead. Along with purchasing new inventory and whatever.

How does the owner eat? Does he take the rest of that money and pocket it? Someone break it down to me please

 

[crystalmethod]

Yes..its gross sales minus overhead





I believe

 

[c0dyboy2222]

end of the day you deposit the money in the safe. that money gets taken to the bank. After Labor, operating cost, taxes and rent whatever is left over is the owners.

 

[slighted]

That's correct, but a business owner usually tries to invest that remaining money into the business.

 

[AgentZero]

Revenues - Expenses = Net Income

Net Income - Dividends = Retained Earnings (which you can use for yourself or to put back into the business)

Funny this came up as I'm doing accounting homework 

 

 

[crcballer55]

The answer can be pretty complicated since it depends on the type of business, how many owners, the stucture of the business, what stage of the business cycle it's in, etc.

A lot of owners I've known mix business and personal accounts and spend for both out of the same account. They've almost always gotten in either tax trouble or business financial trouble doing it that way.

A good strategy (assuming it's not a brand new business) is to figure out what the fixed overhead for the business is and figure out a living wage from that then pay yourself that wage. Based on the profitability of the business and how much you want to grow/reinvest back into it, give yourself a percentage of the profits after you have at least 6 months of retained earnings (emergency fund) in the bank.

 

[wallyhopp]

Look at most companies. Pay people next to nothing. Overcharge or have a high volume setup.

Lots of small businesses have family working for "free". St some point they either fail or step it up a notch, pay someone minimums wage and you're good to go

Franchises seem to be where it's at

 

[djmano34]

crballer knows what he is talking about.

Everything else is speculation

 

[Sir San Diego]

If you're smart, you make yourself an employee and pay yourself a wage just like the rest of your employees. If I'm not mistaken that would be with an S Corp or an LLC. Maybe you pay yourself more, but your business account can't just be your personal account if you plan on making it.

 

[OBAMA]

get money

 

[crcballer55]

Look at most companies. Pay people next to nothing. Overcharge or have a high volume setup.

Lots of small businesses have family working for "free". St some point they either fail or step it up a notch, pay someone minimums wage and you're good to go

Franchises seem to be where it's at

As a personal banker for the top 10% of our clientele during college, there were three common themes. Own real estate, own a business, be an executive at a medium to large sized company. Only a couple of our clients were actually franchise owners and McDonalds has a $2M buy-in last I checked.

 

[dipsetgeneral]

end of the day you deposit the money in the safe. that money gets taken to the bank. After Labor, operating cost, taxes and rent whatever is left over is the owners.

Correct

 

[bravelude]

Think about it...does he just take the money out the register?

Let's say I own a beauty supply store..all my stores revenue is coming from sales. So all the money we get goes to the register.

At the end of the month, that money (after being put in an account) is used to pay the workers, utilities, rent and overhead. Along with purchasing new inventory and whatever.

How does the owner eat? Does he take the rest of that money and pocket it? Someone break it down to me please

You should consider some 411 in Accounting or what not.  You kinda answered the question yourself.  It's the 'remaining' cash/equity/value you have.  In most cases, especially mom and pop types, you need 'cash' for operational activites.

You have to decide whether to be on the payroll or not.  There's a lot of way to slice this, but it's all about coming out with a profit.  You basically have to make more than you owe.  If you don't, you fall underwater and you'll be in big trouble.  It's the reason why most businesses fail, as it's just a slow bleed to death of their initial investment.  

The bottom line is, if you are a business owner and you ain't making money, you are on the 'bottom' of the food chain.  This means, you are going to need to satisfy your creditors first.  If you have enough cash and business does well, you have can decide how you want to use the profit.  Of course this all sounds 'ideal', but the real struggle is when you aren't operating for profit.

 

[varsity kid]

So since this is a sneaker forum

Footlocker:

(hypothetically speaking)
-Manufacture in korea makes AF1 for $20
-They buy Air Force 1 from korea at $45 a piece.
-They sell at $80
-They profit $35
-They sell 1000 pairs a day
-They profit $35,000 a day.
-$35000*31 = $1,085,000 a month
-
Rent-$10,000
Labor-$150,000
Electricity, Phone bill, blah blah -$5,000
Some other stupid bills -$10,000

Net profit: $910,000

IF thats one store, think about the hundreds of thousands.... then think about the advertisements you have to do. Its all business famb.

 

[varsity kid]

If you're a mom and pop store. You take home whatever the F you want. But best believe the good business owner will put some money on the side so they can help out the business, such as decorations and such

 

[bravelude]

no, its not really a choice. if ur business does not generate to cover the short term liabilities like utilities, payroll, u take nothing. u can only take if there is a surplus. the challenging thing is when u juggle with an operating loss. thats when cash comes to play.