Penny Kidd advises business owners to set aside 20-30% of revenue for taxes, though the exact amount depends on your write-offs. Make estimated tax payments on time to avoid penalties, plug budget leaks, and pay yourself a consistent salary to ensure the business actually makes money.
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I think one of the most difficult things for business owners to plan for is how much their taxes are going to be. A way to simplify that is to set aside a portion of every dollar that you earn in the business, your revenue. Oftentimes I've heard people say set aside 25% or 30%. I find that that's sometimes too high for smaller businesses depending on what your write-offs are. But it would be great to find out what you paid last year in taxes and get your accountant to tell you what percentage should I be saving for taxes. They're usually pretty accurate. So whether you need 20%, 25%, 30%, set it aside in a separate account. Sometimes you're not even realizing that you're paying penalties by not paying it quarterly or or filing your taxes in April versus October. Some CPAs will just say, oh, we just wait, but they're not really informing you that you might be paying a penalty if you wait. So pay attention to where the leaks are in your budget. I really like the book called Profit First, where he teaches us that your business was intended to be profitable. If you're not spending some money on yourself for a salary You have a hobby, so you should be paying yourself consistently. Pick some days— the 1st, the 15th, the 5th and the 20th, every other week, whatever it's going to be for you and what makes most sense in your family's life. Just do it consistently. And you might have to start out small. I think it was really painful when I first started. I probably paid myself $100 a paycheck, but I paid myself consistently because one of the gals that I met said, if you're not paying yourself, you have a hobby. There's some truth to that. So what are you doing, um, in your business and in your personal life to make sure that your hobby or your business is profitable if you want it to be?
