ToddLay
April 24, 2018
Physical burnout is real, I’ve experienced it and have seen many business owners face physical burnout in the attempt to DO MORE.
You make great money and sales are way up for Q1 and you see that your business did just over $60,000 in profit for the quarter. When you annualize that you’re about $250,000 in profit for the year not bad.
Here’s the problem now, you made a ton of dough and the income tax that is going to follow it will be a nightmare if you are not prepared to address it.
Now what?
One of the areas I suggest many of our clients to structure their cash accounts is to get a tax savings account in place and then be sure to pay themselves a reasonable salary. (and no $1,500/month is not a reasonable salary).
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[On this post I’m not going to go into what you can be doing with a SEP, or a 401K, but I will say if you are not paying yourself a reasonable salary you are doing yourself a disservice.]
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You want to get your withholding dialed in for your payroll, and then you want to also want to start moving a percentage of your profits (yes, you are going to be taxed on this…). I often lean towards 10% for the state income tax and then 30% for federal, then moving over to a tax savings account every month.
I love seeing business owners winning, don’t you?!
One of our clients, who I have been working with for several years, shared with me just the other day that the amounts we have been moving over to cover the taxes (I tend to be a little more conservative in this area) was more than enough to cover 2017 taxes. A matter of fact they had about $45,000 extra remaining in the tax saving account that they can now move over to their core capital savings account to further build their “war chest” for some longterm projects they are working hard to get the cash together for. I’m so proud of them!!!
You see, it is not about just making more and more cash, you have to be strategic, review your financials at least monthly with someone. We all have blindspots, so having someone that can be objective and in your best interest is what you want.
In a future post I will share more about setting targets in a variety of areas of your financials and tracking those targets for adjustments every month and quarter to hit your financial goals.
Do you know a business owner that wants to improve profits this quarter? I’m here to help.
TODD LAY
Chief Experience Officer
SimpleBackOffice
“Know Your Numbers, Know Your Business”
916-520-8560