Being a boutique owner can be quite lucrative. However, there is some fluctuation in the potential earnings of your boutique. According to Zip Recruiter, boutique owners make between $17,000 and $200,500 per year, with an average boutique owner making $72,160 annually. Of course, the amount of money your business makes will depend on a few important factors, such as the location of your boutique; the amount of foot traffic you see daily, and whether or not there is a demand for what you sell in your boutique. As a business owner, you may be wondering how you can pay yourself from the profits of your boutique. Well, I am here to tell you a couple of ways that you can get paid.
To pay yourself as a boutique owner draw a weekly, bi-weekly, monthly, or annual salary. The second way to pay yourself through your business is to use the owner’s draw. With this method, you simply take money from your boutique’s profits on an as-needed basis.
Let’s read along to discover the pros and cons of paying yourself through both a salary that you draw on a predetermined basis or through an owner’s draw. We will also take a closer look at a few of the factors that can affect whether you choose to pay yourself through a salary or owner’s draw. By the time you are finished reading this article, you should have a much clearer idea of what method is best for your boutique and you.
Why Should I Draw A Salary?
The first method that you can choose to pay yourself through the profits of your boutique is by drawing a weekly, bi-weekly, monthly, or annual salary. If you choose to pay yourself using this option, it is of the utmost importance that you remember to withhold taxes from your check. Failure to do this will probably get you in serious trouble with the Internal Revenue Service. Perhaps the greatest advantage of paying yourself a salary is that you know exactly when you are getting paid, and how much you will be getting paid. This is a fairly common option with business owners of any pipe. For example, I have a friend who owns the local dairy where I live. He draws a salary from his business.
While there are a few reasons why you should not choose to draw a regular salary from your boutique, I would like to discuss two of the most important reasons why you should reconsider if you are thinking about drawing a salary, or if you are already drawing a regular salary from your business. Perhaps the most important reason why drawing a salary can be detrimental to your business is that you will get paid whether or not your boutique makes a profit for that week, month, or year. By choosing to pay yourself in this manner, you can accrue a significant amount of debt, which can affect not only your boutique but also your personal life. This can potentially ruin your business’s credit and your personal credit, and cause problems with other aspects of your boutique.
The second (and probably the most important) reason why you shouldn’t draw a salary may not be as obvious. Drawing a salary has the potential of preventing you from expanding your boutique, should you choose to do so. If you pay yourself the same amount each pay period, you run the risk of paying yourself funds that you could use to either open a second location or purchase additional merchandise that would be beneficial in helping you to appeal to a wider customer base. As I previously mentioned, drawing a salary may not be a bad idea for many business owners. It can provide you with the comfort of knowing of when you are getting paid, and exactly how much you can expect to be paid. However, you must remember to put aside funds that may be beneficial to your boutique at a later date. Ultimately, paying yourself a salary will depend on whether or not your boutique turns into a regular profit, and if you have plans to expand your business.
Why Should I Pay Myself Using Owner’s Draw?
The second way in which you can pay yourself as a boutique owner is a method called owner’s draw. If you choose to utilize this method, you simply withdraw funds from your boutique’s profit on an as-needed basis. One of the primary reasons why many business owners choose to pay themselves through owner’s draw is that this method allows them to exercise extreme caution when it comes to their business’s profits. Simply put, if the boutique does not turn a profit for a period of time, the owner will not withdraw any funds from the business. Another benefit of using owner’s draw is that the boutique owner has the luxury of being able to see if they have the available funds to expand.
Of course, the primary argument against paying yourself through owner’s draw is that you do not have the luxury of knowing exactly how much you will get paid, or when you will get paid. For most business owners, this can prove to be a rather uncomfortable option. There may come a time in which you will not be able to withdraw funds from your boutique, because there may be money that is allocated to other expenses such as overhead, utility bills, rent or mortgage, or employee salaries. However, this may not prove to be an issue if you run your boutique single-handedly. By not having additional employees on your payroll, you have the option paying yourself, even if your profit is slightly less than it has been previously.
Owner’s draw may prove to be a viable option for a boutique owner who sees a lot of foot traffic that results in increased sales and profits for his or her business. Still, I would not recommend paying yourself through owner’s draw until you have had enough time to closely analyze your boutique’s pattern regarding sales and profit. We are all aware that the economy experiences drastic fluctuation, which will have a significant impact on your boutique’s sales. I’m sure that I speak for the majority of you when I say that the last thing you want to do is potentially harm your business by withdrawing funds that you may need to be available in the future. For this reason, I would recommend waiting until you have had time to understand the sales patterns of your boutique before paying yourself through this option.
Conclusion
In conclusion, drawing a regular salary and using owner’s draw are the two ways in which you can pay yourself as a boutique owner. By paying yourself a regular salary on a predetermined pay period, a business owner has the luxury of knowing exactly how much they will get paid, and when they will get paid. This can be especially beneficial when it comes to budgeting your expenses in your personal life. However, paying yourself a regular salary can be detrimental to your boutique’s success if you do not turn a profit during that time. It is also important to remember that you will need to deduct the appropriate taxes from your check if you use this method to pay yourself.
Another method that business owners use to pay themselves is called owner’s draw. In this method, the boutique owner simply withdraws funds as needed from the business’s profits. Paying yourself through owner’s draw can be quite beneficial to your business because it allows you to see whether or not you made a profit before withdrawing any funds from your boutique. While this may not be the best option for your personal expenses, it is quite beneficial to your business. If you have any plans for expanding your business locations or to increase your inventory in the future, owner’s draw may be a good option for you. However, paying yourself through owner’s draw may not be the best idea if you have not been in business for very long, and have not had time to evaluate the sales patterns of your boutique.
How To Start a Clothing Line: Opening a Clothing Business
Related Questions
How many specialty boutiques are currently in business in the United States?
There are many different types of specialty boutiques that can currently be found in the United States. As of 2019, these amount to 167,383. This is an increase of over 4,000 boutiques from the previous year, with current expectations that this trend will continue in a positive direction.
What are the most popular types of boutiques open in the United States?
Perhaps the biggest advantage of owning a boutique is that you have plenty of options regarding what you want to sell. In the United States, some of the more popular types of boutiques include:
- Clothing stores
- Children’s clothing
- Pet supplies
- Baked goods
- Vinyl record shops
- Health and wellness products
To learn more about how to start your own fashion clothing line check out my startup documents here:
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Meet Shawn Chun: Entrepreneur and Fashion Business Fan.
I’m a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a designer or boutique owner at a craft fair, farmers market, retail location or anywhere else I see myself. I know how hard the struggle is to retain clients, find good employees and keep the business growing all while trying to stay competitive.
That’s why I created Fashion Business Boss: I want to help fashion business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.