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JLeslie's avatar

How much would you pay a manager in your small business?

Asked by JLeslie (47352 points ) May 29th, 2012

Let’s say you have a small retail busines that brings you about $150k a year in your pocket before taxes. You hire a manager to relieve you of having to work so many hours. He is going to work full time, and his daily tasks will basically be what yours are when you’re working. He will work 40 hours and you will work about 50–60 still, splitting shifts with him, and also doing extras being the business owner. What do you think is a fair salary?

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32 Answers

marinelife's avatar

How many employees does he have to supervise? Does he have to do the books? What is the business? Does it involve heavy lifting?

Neizvestnaya's avatar

About $5k a month, pre tax if the addition of his position will generate at least that much increase in business. Aside from that, I’d be stumped.

CWOTUS's avatar

Whatever you and that person agree on ought to be fair. If you find a college kid who’s willing to do that on an apprentice type business so that she can learn about “business in general”, then it may not be a requirement to pay a high salary to attract such a person. On the other hand, if you’re going to attempt to hire someone experienced and capable from a similar retail situation, then your starting offer may have to be much more attractive. And that person may be worth even more than you currently net in profit, too. But that’s between you and that person.

grumpyfish's avatar

My first question is market location. San Francisco pay is very different than Monkey’s Eyebrow pay.

I like @CWOTUS‘s thoughts on what sort of person you’re hiring. Think about long term—replacing the person may be expensive, so if this hire is someone you think will be a good fit, consider giving them a rate above scale (after a probationary period) to help keep them around.

CWOTUS's avatar

Why don’t you answer the question, too, @JLeslie.

Let me ask you a question in advance to help guide your response. What do you suppose “the current owner” pays himself or herself as a current annual salary? Do you suppose that to be $150K? I don’t, but I’m interested to hear what you think.

Tropical_Willie's avatar

How much do other, similar businesses pay? You are not an island ( your business ) with a job market.

Dutchess_III's avatar

What do you mean by ”..brings you about $150k a year in your pocket before taxes. ” Are you talking $150K gross? Also, what kind of business? Does it handle a lot of inventory or is it a consulting-type of business?

Dutchess_III's avatar

My shop grossed $250K a year. After all expenses (and taxes were pretty negligible, except for sales tax, but you don’t pay that—your customers do. You just have to get it where it’s supposed to go. Sales tax is not considered an income. I always got a bit of a refund on my fed. taxes every year) I struggled to pay a mechanic $250 a week. We had to let him go completely during the winter. Rick and I supported ourselves and the house on less than $20,000 a year.

I’d really have to have more details about what type of business.

JLeslie's avatar

@Dutchess_III Not revenue. The $150k is after taking out expenses, but before taxes. Basically the money that is your income you live on generated by the business. Are you saying your $250k revenue netted down to $20k take home after all expenses, interest, etc.?

@marinelife He only surpervises one employee, sometimes he is the only one in the store.. Maybe if business gets busier he might supervise one more person in the future.

He doesn’t do the books. He takes in deliveries, gets the merchandise that comes in onto the selling floor, sells, counts money, tallies the register at the end of the night.

@grumpyfish True location matters. Let’s take the most expensive cities out of the equation, not cities like NYC, San Fran, or San Diego. Let’s call it a suburban area, reasonable sized city like Boca Raton, FL; Memphis, TN (which is where I live now); or Royal Oak, MI. Boca would pay better than Memphis for sure, maybe a $5k to $10k difference, but not a $20k+ difference. If my city tended to pay very low wages, I would still pay higher. I am disgusted how low the wages are in some areas of the country. I don’t care what the cost of living is. I pay the people who work in my yard better than most, and I have had a maid come the last couple months because I was injured in an accident, and I pay her usually more than she asks for, because she works so hard. If I used a service I would be paying more anyway, and she would be paid crap if she worked for them. I rather pay her well and still save money. I tend to like the happy, reasonable, fair medium. And, to pay what I would want to be paid if I did the same work.

@Tropical_Willie I know what mall stores tend to pay, but they manage more staff. Managers in training make around $25k, but managers who are responsible for smallish departments or small stores tend to make $35k+. I would assume a small store in a strip mall, which is where my store would be, they pay closer to the $25k mark, not sure.

@CWOTUS It’s hypothetical, the jelly who is answering the question is the hypothetical owner. I am inclined to pay him well, say $45k assuming he is trustworthy, takes on the business like it is his own, has a very flexible schedule, and I like working with him. Possibly more. Or, maybe $40k plus commission or bonuses. I like the idea of incentive pay in the compensation structure.

I was curious to see if people would look at what the competition pays, want to pay as little as they can get away with, pay very well hoping for strong loyalty and quality work. Or, maybe look at how much time he is working compared to me as the owner and give him a reasonable share based on a ratio of how many hours he put in compared to mine, taking into consideration he has less responsibility and not keeping the books. Or, whether how much I was taking home in profit, or paying myself a salary, mattered at all in the equation to jellies? If it is only a matter of what employees are paid, and not how profitable the business is? Of course if the business does not make a lot of money you can only pay an employee so much, but I gave $150k so there is reasonable room to pay a good salary.

I ask the question because I have been thinking about a retail store business, but it would not net $150k, especially not in the beginning, but probably not ever. I was also thinking of a relative of mine who makes about $70k at the end of the year from his business, and I really think he should hire a manager, and work less, he is getting older, talks about selling the business, but it would be financially better in my opinion to keep the business and let someone else take some of the hours. His business is almost impossible to sell anyway, because the strip mall owner will not renew his lease, so it is a month to month. He could probably pay someone $25k, but I would pay more if I were him, have someone really run the thing and basically cut his working hours in half, make his life much easier and still take home $35k.

Dutchess_III's avatar

@JLeslie Yes. $20K was what we took home after expenses. Ours was a very inventory based business.
What is the gross for the business you are referring to? Have you worked up a business plan? What your expected expenses and expected income will be, and how did you come up with those figures?

I’m sure that the problem your relative is facing is simply what happens if the person he hires mis-manages the business. It could destroy everything he’s worked for, and take everything he’s saved and acquired. And if he found someone trust-worthy, could he downsize so that he could live on $35K? It would have absolutely terrified me to put the business in someone else’s hands.

CWOTUS's avatar

Actually, with a business that is so marginal (a $70 K salary being not much for an owner of an established business, and being located in a location that can be closed down with so little notice), he’d be far better off selling the business while it has any value at all, and retaining a small stake for either income or hope of appreciation.

No manager worth the title is going to commit a career to something so out-there, I think. But an entrepreneur might.

JLeslie's avatar

@Dutchess_III Yes of course his fear is “letting go” of the business. I don’t mean for him to be totally removed from it, he still could go in 4 days a week, oversee everything. He doesn’t want to live on less, that is the main problem. Understandable.

Dutchess_III's avatar

My point is, it’s still all in his name. Anything that happens, comes back on him. Lawsuits, IRS, whatever. Comes right back on him.

JLeslie's avatar

@CWOTUS How does he sell a business if he can’t guarantee a new owner even a month more of tenancy? He would have to move the business and have a lease that he can transfer to the new owner.

@Dutchess_III Oh, I see. I don’t think that is a big factor those things. The only thing is if someone got hurt on the job, but that can happen anyway, he has an employee who works for him now,

Dutchess_III's avatar

@JLeslie Letting go of my business destroyed me financially. I’m only now starting to recover, and I just hope I have enough time. Someone getting hurt….well, I had insurance for that.

What type of retail business are you thinking of? Let’s crunch some numbers! :)

CWOTUS's avatar

That’s not entirely true, @JLeslie. You sell the business goodwill and its assets, client list, technology, licenses (assuming they’re transferable) and the stock of inventory and equipment. Tenancy is something that the new owner can either negotiate prior to the sale with the current landlord, accept month-to-month on the same risk basis that the current owner accepts, or move himself.

My daughter bought her commercial kitchen last November from the previous owner in a storefront rental location; I don’t know offhand what the leasing arrangements are. But all she bought were the equipment, goodwill and current improvements made to the rented location with the landlord’s permission. Her next move might be to buy her own restaurant within a year or two, which is not an outlandish proposition… now.

Dutchess_III's avatar

Give your daughter my highest regards, @CWOTUS!

Those things can be a HUGE factor, @JLeslie. You get an unscrupulous “manager” who is stealing money, and things are suddenly looking very different to the IRS than they have in years past….BIG problem. Lies to customers about product….lawsuits. BIG problem.

JLeslie's avatar

@CWOTUS @Dutchess_III The relative has a small sandwich shop. The only equipment is a meat slicer, fridge, and a microwave. There is the display case for the condiments, and 3 tables with chairs, and a few chairs at a counter. He does have a loyal following and also tourist traffic. Even if he sold the business for a great price, he still would be better off monetarialy making the $35 a year. I was searching for what he might be able to sell the business for and I think it is anywhere between $50k and $100k, not sure exactly. Do you have an idea what businesses tend to go for? A years profit? A couple years? Is there a general rule?

But, of course if the business gets run into the ground that is a problem. All I know is I worked as a manager in retail for years, and we did not run the businesses into the ground. Stores all over America are profitable and not run by the owners. Basically every chain store and restaurant is in that situation.

The business I really want to open is a karting track with my husband and retail store to go along with it selling the karts, suits, helmets, etc. The big huge fantasy is to have an inn there also or cottages and a club house with a pool, and people could come for the weekend or buy a place and use it as a weekend retreat, or just join the “club” and come whenever, use the track and relax. That is pie in the sky will most likely never happen.

But, the smaller idea is to open a retail store with racing gear like the suits, helmets, racing seats, shoes, gloves, etc., and also general car fanatic stuff like t-shirts, key chains, mugs for BMW, Porsche, Corvette. The car clubs are pretty active in my area. Our club, Porsche, has around 400 members. Then there are all the other Porsche owners who are not in our club. Only about 100 are somewhat active, there is a core 40 people who really show up to a lot of events. Our Autocross events get about 20–30 people every month, and our DE’s at the track get around 80–100 cars. Those numbers are not going to generate a ton of revenue I don’t think, even if you multiply it by people who don’t own those cars, but still might buy a shirt and the people from the other car clubs who race. There is also a carting track about 40 minutes away from a fairly central area of the suburbs, mostly kids race on it. They need all the gear also, and obviously grow out of clothing and shoes, and if they could try stuff on maybe that would be very attractive rather than buying on the net. I have not really started crunching numbers, or calling vendors. For all I know it is very hard to get some of the stuff. Porsche might be very particular who sells their goods for instance. Maybe Sparco (they are a very popular race gear company) also? All this stuff can be bought online. There is no other store in my area selling this stuff that I know of. Someone just starting into racing easily spends $1500+ retail in clothing and protective wear.

Another idea is my husband wants to have a garage space that people can rent out to work on their cars. A lift, air pressure thingy, tools, etc. I have no idea if that would work? We sometimes go to a friends house if they have the tools or a lift, maybe people would pay to use a space like that? A mechanic could also utilize the space. If it was big enough we could store cars and trailers for people. What do you think?

Of course all the car business ideas can work together in one location, or we can do just one of the ideas. Or, nothing.

Dutchess_III's avatar

Wow. @JLeslie. Garage space is a good idea…but you better have hellacious insurance for injury situation.

JLeslie's avatar

@Dutchess_III Yeah, insurance is also a big factor with the track idea, although everyone signs a waiver at a track saying if they are injured it is their own problem.

CWOTUS's avatar

Given this set of facts, @JLeslie, if your relative can find someone willing to work for a salary at the current location, then he might be better off cutting his hours and giving the new manager a share of the increased profit she can drum up with new ideas, including:
– increased hours of operation
– increased menu choices
– broadening the business in general, such as catering and party platters, etc.
– offering delivery in a restricted area, etc.

This is a business that on its face seems to be pretty much at ground level already. It needs to be expanded (at least slowly, and in several ways) in order to survive.

JLeslie's avatar

@CWOTUS Thanks for the suggestions. They do some of those things already like the party platters. They tried delivery and it did not go very well. They do deliver to some businesses very close by, but that is it. I think the increased hours might work. They basically just do breakfast and lunch. I think they close at 6:00, so someone could grab a sub to take home for dinner. I am not sure how much business they would do at night? Meanwhile, I don’t want him to even consider extended hours without being willing to consider hiring a manager in some way or another, whether it be profit sharing, salary, whatever.

Dutchess_III's avatar

@JLeslie The wavers work, within reason. But if one of your husband’s tools malfunctions and causes a problem, it would still come back on him, waver or no waver.

JLeslie's avatar

@Dutchess_III Yeah, I know. It’s like my accident at the track. Some people have been telling us to sue the track, because they have had many accidents on that steep hill, and supposedly there was at least one death. They are very aware of the dangers, and yet they do nothing. It is unreasonable in my opinion, and shows a lack of caring for others, which really bothers me. How do they sleep at night knowing many people have been hurt in the same place? We aren’t inclined to sue. I do wish they would make it safer.

Dutchess_III's avatar

But, in the meantime, people are still going there!

JLeslie's avatar

@Dutchess_III Oh, get this. A few months before when we were planning our race trips for the year, I had said on 2 or 3 different occassions that I didn’t want to go to that track this year. So, we go, I get in accident, my husband doesn’t get to race, I’m all banged up, not able to even go to the bathroom my vertigo is so severe, and then when that gets somewhat better I still can barely move on my own because I am in so much discomfort, and what does my husband say, “now we have to come back next year.” Can you beleve it?! Hahahahahaha! See, we kind of have a plan to race each track he is interested in twice, and he has only raced that track once, but he has driven on that track several times for racing schools and just to go fast, but not compete. I think it should be enough, but he seems to think he needsmto go back.

Dutchess_III's avatar

What kind of racing @JLeslie?

JLeslie's avatar

@Dutchess_III Porsche Club racing. I’ll send you some photos on crackbook.

Dutchess_III's avatar

WTH is crackbook???

JLeslie's avatar

@Dutchess_III Facebook. Aren’t we facebook friends?

Dutchess_III's avatar

IDK, honestly. I’ve never heard it called Crackbook before!

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