Small business and Smart Earnings.
Owning a small business can be a great way to secure earnings only when you know how to nourish and cultivate the small business from inception. If you have organized plans for the business, proper backup, and an efficient team to work with, and a market that has demand for your products, you may make your business stand out with time, and generate substantial income for you and your family. There are healthy and practical ways to cultivate income from a small business, and if you have planned from the very beginning, you may do so and start a few small businesses, lead an entrepreneurial life, and reap the benefits. Here is how you may earn from your small business in 3 smart steps.
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Taking salary for your efforts in your small business investment
You can generate the first source of income from a small business investment through taking a reasonable and honorary salary for your efforts as the founder. Small businesses sustain and also fail for more than one reason. One important reason is the sharing of the revenue. If you, being the owner, take the lion’s share of the revenue earned to suffice the needs of your family and your standard of living, you may never find the small business investment to be a profitable venture. That’s because, right after the launch and within the first struggle period, it is not expected of a small business to grow fast and bring in lots of revenue that can meet all demands like staff salaries, entrepreneur expenses, office running expenses, and business funding. Therefore, in those initial days, you will have to do something extra.
It will be your choice that you do some other day job and support the small business as the extra budding venture, or devote all of your time into it. But if you decide to give in all the time, you still cannot expect the new business to provide you enough income right from the inception, as did your earlier day job for supporting the family expense. Rather you should restrict your salary to feasible amount, which can be taken out of the revenue without jeopardizing important business processes. That is how you start with it, and gain from a small business investment.
A small business where the entrepreneur takes a fixed salary can be announced as a limited liability company. In such cases, the salary which the founder takes for his efforts are referred to as the guaranteed payments, and upon showing them in accounts, your business’s financial statements are affected positively as it brings you tax benefits.
Smart Earnings – Taking dividend based incomes from the profits of the small business investment
This is how you get the second source of income from your small business investment. Dividends are those incomes which are generated from a business when the profit is shared in proportions of investments, effort given, or shares owned by investors, staffs, or shareholders. If you are generating profit from your small business, this profit can bring you the second type of income from the investment. A profit normally gets divided into dividends in the case of a corporation, or draw in case of a sole proprietorship, and a distribution in case of a limited partnership or liability company. In any such case, this portion of the profit can be distributed among all members, staffs or shareholders, and the founder or entrepreneur definitely can take his portion. How the founder will use his portion of the dividend depends on his vision of the future.
If you as the founder believe in living a better life now and don’t want to preserve wealth for the future that much, then you may spend this dividend based income on present lifestyle, family running expenses etc. In case you want to save more for a rich future and take more business risks, you may spend the earnings on expanding the business, or creating backup capital funds for the business.
A founder has real responsibilities towards the future of the business. Hence saving funds can help later when the business gets in some crisis, or is in need of funds immediately. Often in such situations, the business owner has to take hasty decisions for fund arrangement by taking multiple loans on high interests, and later mourn because of difficult debt management. This leads the owner to consolidate his debts for simplifying things, thus learning the debt consolidation meaning the hard way. If you don’t want this story to be yours, then saving for the business from the start will be a healthy choice.
Smart Earnings – Earn once again when you sell your well settled business
If you are successful in settling the business well, your next set of earning can come from the capitalized earning brought though the price you get for the business. Investors who are interested in buying successful businesses may come with great proposals. If you choose to sell the business to one of them, you earn from the deal. However, investors would be interested in buying a business only when it has steady earning potentials and promising returns every month. If the business has great assets but not much promising monthly income, it may not bring you great offers when being sold.
Sometimes small business investors would establish a small business, make it grow, and settle it, only to make it big enough for attracting interesting deals. If you are also one such business owner, you stand a good chance to sell your business and earn from it. And you may use portions of this earning to start another business again. This method of raising money through selling a well performing business is called liquidity event.
Smart Earnings – Other ways of income
There can be many other ways to earn, and one popular way is to acquire the land or real estate where the business stands. This can fetch the monthly or annual rental or lease for the land, and the founder may always get a substantial income from the rent. Many business owners try this and buy the land on which the business stands beforehand to make sure they get earnings from the rent or lease for a lifetime.
Author Bio: Isabella Rossellini is a financial and business advisor who mentors people on business founding, business acquisition, loans and debts, and such things. She is therefore a great source to understand business terms and concepts like debt consolidation meaning etc.