What is a Business Owner Worth? - Nicaragua Internship Summer 2009

How much do you make in a year? It’s a question that is more acceptable in Central America than in the United States, but its response is often quite different. Whereas a North American often knows her salary at least in general terms, in Central America that often is not necessarily true.

In a recent meeting of over twenty-five bakery owners and workers, the question was posed, “How many of you pay yourself a salary?” Not a single hand was raise, and it took further questions to learn that at least one woman set aside money each period for her own expenses, to pay her workers, and to save up for future investments in the bakery.

However, this raises the question of what an owner of a business is worth. How much should a bakery owner pay himself? How much of the profits should go to the owner, how much should be reinvested in the company, and how much should be directed toward other things? While these decisions may be some of the first made by someone starting a business in the US, many of the bakeries represented in the meeting had been in existence over ten or twenty years. During that time, funds are allocated as need arises instead of through careful planning. Some owners may choose to reinvest almost everything in the business while others are generous with their personal spending. In either case, the line between personal and business expenses is blurred.

To help business owners take control of their finances, Business Professionals Network (BPN) teaches them to track their finances. While the focus is on the business costs, expenses, and income, owners are also encouraged to do the same with their personal finances. By making a personal budget, a businessperson can determine what salary is necessary to cover his expenses, and what should be left for the company.

In the end, what is an owner worth? She is worth a salary that covers her expenses but that still leaves profits to reinvest in the company and protect it from shortages. An owner who manages the company well should not be keeping every dime of profit, but should also have a salary that allows freedom to enjoy life.