In Valuations, we see a range of salaries paid to Business Owners. Some market, some low for tax purposes or as part of salary packaging, and some above market for various factors.
When we come to working with a client on a succession plan (e.g. selling a small shareholding to a key employee), we discuss the importance of agreeing to 'market' salaries. Now - the question of what a market salary is depends on the industry, size of business, location and your expertise.
What the decided market salary is can have a significant impact on your valuation. Take for example, two owners in a business who are only paying minimal salaries. If we needed to increase salaries to market and this was a $100,000 adjustment, that could be up to $600,000 of value 'drop' in your financial planning business. Certainly better to know about it sooner rather than later.
If you'd like to discuss what a market salary is, and how it impacts your business valuation please contact our office.
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