Those of you who have
or have had a business where you employed workers can relate to this article which
appeared in a 1952 issue of Radio & Television News magazine. Never
having had that responsibility, I cannot relate directly. Small business owners
I have known have told me about how their first responsibility is to pay employees
before paying themselves, and no one who has never been in that position can truly
relate to it. What I find interesting in these kinds of vintage articles is the
cost of goods and services back in the day, with the help of the Bureau of Labor
Inflation Calculator. For instance $100 per week ($5,200/year) income
back in 1952 is supposedly equivalent to $1,024 per week ($53,248/year), which really
is pretty good. I don't know how generous fringe benefits (medical, dental, vacation,
retirement, etc.) were in 1952 compared to today, and that information would be
needed to do an apples-to-apples comparison on overall compensation.
Can You Pay Yourself a Salary?
Table 1 - Owner's annual salary as compared with compensation
paid to employees.
By Harold J. Ashe
Is your service business providing you with an adequate return for capital and
The self-critical radio-television service shop owner may very well ask himself
whether, in fact, he is a success in his business. Self-esteem may dictate an affirmative
answer even though an objective analysis might indicate a contrary conclusion.
While there are many ways in which business success may be evaluated there is
one acid test that is paramount. This test is: can the shop owner pay himself a
salary out of business earnings, and one commensurate with his value to the shop?
Few people are in business for their health, and service shop owners are no exception.
There is not much point in taking on the heavy responsibilities of shop ownership
unless there is an adequate financial reward. Nevertheless, there is considerable
evidence that a large number of radio-television shop owners are making less for
their time than their highest paid employees. This means they are making nothing
on their capital investment.
How much should a radio service shop owner make to equal the wage or salary of
his highest paid employee? If the shop owner's top employee is paid $60 for a 40-hour
week, the hourly rate is $1.50. To be equally well compensated, the shop owner must
pay himself an annual salary of between $5148 and $6177.60 for his time! And this
will only put him on a par with his highest paid employee. This is not a typographical
error. Yet, many radio service shop owners fail to net such a return for both personal
services and capital, let alone for their services only plus an additional return
How is such a shop owner's salary arrived at? The thing to remember is that while
the employee earns $60 for 40 hours service, the shop owner, on the other hand,
devotes 60 to 72 hours or more a week to his business. He gets to the shop early
and he leaves late. If he keeps the shop open one night a week, he is the one person
most certain to put in a night shift. In addition, he is likely to spend nights
in the shop going over his accounts and doing necessary paper work, taking physical
So, assuming the shop owner values his time as being worth at least as much as
his highest paid employee getting $60, he must pay himself far more than that. On
a 66-hour week basis his salary should be $99. That's not all. Employees have certain
fringe benefits in addition to their pay checks. The shop owner covers them with
workmen's compensation, unemployment insurance, old-age social security and sometimes,
life insurance policies, and may give yearly bonuses. These add real value to the
pay check. Thus, another 10 per-cent should be added to the $99 to compensate for
these other valuable considerations obtained by employees. This brings the shop
owner's salary to $108.90 a week or at an annual rate of $5662.80.
This $5662.80 still does not provide any reward for the special management skills
and responsibilities of the shop owner that distinguish him from even his most valued
employee. Neither does it provide for a fair return on his capital. Nor does it
give a margin to offset the risks peculiar to the business and which are inherent
no matter how sound the management.
NOTE: To the foregoing salary should be added an amount representing the fair
value of the owner's services over and above the value of the highest paid employee.
In addition. there is still an amount to be earned as a return on capital investment.
Posted October 7, 2021