Expert: Russel Ray - 2/12/2009

Question
I am 40 years old and have worked for my local county weatherization program for 23 years. I am not only a worker, but the auditor. Ive been saying that weatherization is going to be a big thing for the past 10 years, (sad to say, the worst the economy, the longer these programs exist), anyway, I am going to start my own business doing weatherization and real estate / foreclosure clean outs...First Question is... I am use to getting a paycheck handed to me every 2 weeks, what do I pay myself and what goes into the business?
   Second Question..How do I know what to pay my crew?
 And do you think I getting over my head with combining two ventures into one?

Answer
Hey, Michele.

When it comes to starting a business, and paying yourself, you have a lot of flexibility, but the person to help you with this in your specific state (and I don't know what state you're in) is a talented CPA. That CPA will be worth every penny you pay him during the startup and growth phases of your business.

First off, though, I never recommend anyone starting a business unless they have a savings account with enough money in it to pay for startup costs and to pay for six months worth of business and personal expenses. That type of security, especially in this economic climate, is an absolute necessity in my opinion.

Second, you can pay yourself daily, weekly, biweekly, semi-monthly, monthly, quarterly, or annually. You can even not pay yourself and take a draw at the end of the fiscal year, or you can take a draw whenever you need one. Draws can be inconsistent, so if you capitalize the company, and then need some for your personal expenses, pay yourself a draw. Or you can start on a salary at any time. There does come a point where you have to start paying yourself, but I'm not familiar with the current tax laws on that, whereas a CPA would be. Obviously, you're better off if you start paying yourself a salary immediately, but it doesn't have to be an outrageous salary. It can simply be a token salary and you can give yourself appropriate raises as the company ramps up and starts making money.

So get a realistic and achieveable business plan, marketing plan, and pro forma income and expenses sheets together, and then capitalize the company appropriately, hopefully including a reasonable salary for yourself.

As to crew salaries, again I don't know what state you're in, but such salaries here in San Diego range from a low of minimum wage (which I think is $7.85 per hour right now in California) to a high of $20 per hour for crew supervisor. In this case, the crew supervisor will probably be you.

I don't think you're getting in over your head with two ventures. In fact, I think it's a good way to diversify your business so that you don't have all your eggs in one basket.

Hope that helps.

Good luck with everything.