The financial joys of owning your own business. Big salary. Lots of vacation. Lavish health care. Retirement plans. Luxury cars. Are you enjoying this in your business? Not likely.

Most of our contacts today bemoan how little they are able to take out of their businesses compared to their expectations. Gross revenue may be in line, but operations are not generating the amount of cash that was dreamed and expected. How do business owners counter this highly de-motivating fact?

A depressed client recently told me that as owners, they were forced to draw less than $50,000 from the business last year. The spouse did not work outside the home, but provided support by carrying the vast burden of childrearing so the working partner could spend 60-80 hours per week at the company. I agreed that it was absolutely a partnership since a spouse at home is a significant partner and contributor to any business owner. I further agreed that amount represented very modest personal income for the huge hours and total financial risk of having all their personal assets tied to a business loan guarantee. However, we looked deeper.

They had a large key man life insurance policy to protect the business and family in case of the untimely death of the working spouse, the family’s primary wage earner. Had he or she been employed elsewhere, this protection would have been purchased with after-tax net wages.

At least three business trips to trade shows during the previous year included family members and extra days at the destination for some family vacation time. The IRS allows the majority of this as a deduction, and it was worth several thousand dollars.

Clothing with the corporate logo was worn virtually every workday, most evenings, and some weekends. While cash was not paid in salary, the advertising impact of logo attire created a fully deductible business expense worth over $3000 a year to both adults.

Other benefits included two company vehicles, plus all maintenance, insurance, and fuel, a large number of meals at the office and with clients, health insurance, disability insurance, retirement plan, and second phone line and computers in the home for working off site.

The sum of this research, identification, and math project was that the total owners compensation for this couple was almost double the stated salary taken from the organization. The result of this finding? A much more satisfied owner who felt good about the return on investment for the time devoted to and the risk inherent in owning the business.

Does this apply to your business? Have you ever considered and calculated the indirect and non-cash compensation you receive as an owner, partner, and manager? The headlines bring stories of multimillion-dollar compensation packages. As interesting as they are, they do not reflect the income of 99.8% of the taxpayers in the United States (1999 IRS statistics.) However, seeing and realizing that as an owner you receive $60,000 and not $30,000, or $90,000 and not $60,000, is very significant. Add it up and smile. Owning a business does have short and long-term advantages. Then, take your new appreciation and look hard at how to generate that much in cash as base income this year.

© 2003  Jeffrey J. Bowe is the President Actum Group LLC, in Indianapolis