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Bus and Motor Coach Library

Your Company Deserves To Make Money Too!

Author – Brian Niddery (2001)

All too often small business owners tend to treat their personal income and their company's income as one and the same thing.  In fact many owners suffer from the "Whatever is left over at the end of the month is mine" syndrome.

It is important to understand that as a business owner, you are responsible for generating two distinct incomes. 

Firstly, as an employee of your company, you must be paid a fair and reasonable wage for your work - no more and no less than you would expect if you were an employee of some other company.  Whether you are handling driver duties, dispatch, maintenance, or bookkeeping chores, you must be paid for that work!  Moreover your company must pay these wages to you on a regular basis just as it is obligated to regularly pay any other employee.  It must also be understood that all such wages are an expense to your company!  Let me repeat this!  Your wages are a company expense, and must not be considered as part of company profit!

Once you have accepted that as an employee of your company you deserve to be paid for the work that you do and begin paying yourself on a regular basis, only then can you don the hat of a business owner. 
There are now two separate entities.  There is the "you" who is an employee, and there is the other "you" who is the owner of a business.  As the owner of a business your primary responsibility is to ensure that your company is making a fair return on its investment!

What is a fair return on investment?  Most business professionals consider that 15% of gross billings is a suitable and fair return.  Consider the following scenario.  An owner has a small fleet of two coaches.  Per day billings are averaging $500 and each coach generates about 200 revenue days per year.  Total billings in this instance would amount to $200,000.  A fair return on your investment would therefore be a $30,000 profit.  To provide this return, total company expenses cannot exceed $170,000 (including of course the wages that are being paid to the other "you"). 

If your expenses exceed this figure, then you must carefully review your rates so as to provide "you" the business owner with a fair and reasonable margin.

As a business principle, there are two distinct assets at work here.  The first asset is you!  Your personal skill and experience has a definitive market value.  Whether as a driver, mechanic, or manager, your skills are valuable, and other companies out there would be willing to pay you a reasonable salary in deference to your skills.  Therefore your own company has this very same obligation.  It must pay you for the work that you perform as an employee.

The second asset is your business investment.  A business is obligated to generate a reasonable profit for its shareholders.  As harsh as this may sound, if your company is incapable of generating a reasonable profit for you, as a shareholder you should consider selling or liquidating it and putting your money into a better investment - something else that can give you a better return on your money.

Here's an acid test that you can use to judge the success of your business.  Hopefully it may help to foster a healthier business attitude and a more cavalier approach to your business.  If you are earning a fair and reasonable personal salary from your business, and your business is also earning a fair and reasonable profit, then you should be in the position to make one of the following choices:

A) You can continue working for your company for the sheer fun of it and earn a fair salary.  In addition to this your company is also earning a healthy profit, which you are either banking or using to expand your business.

B) You are golfing, fishing, boating, or attending to your numerous hobbies and leisure activities full-time, and every once in a while you drop into your business establishment just to say "hi" to everyone, because you have now hired staff to do the work you used to do as an employee of your company, and you can now comfortably live off the profits of your company.

If you are unable to make this choice now, then you must decide how you are going to achieve this ability in the foreseeable future.

To summarize, as a business owner you have two obligations! 

Your company has the obligation and responsibility to pay you as an employee.  In addition your company has the responsibility to generate a reasonable profit for you, its principal shareholder!