Question

It is usual for owners of small, growing companies to live off of a salary which represents their basic needs and not their worth.

Answer 1

Owners of small, growing companies often pay themselves a salary that covers only basic needs to reinvest in their business, sometimes with the help of angel investors. A businessman might hesitate to ask for a deserved raise, using hard work as a comfort. Small businesses can exist without economic profit due to personal or community value.

Step-by-step explanation:

For owners of small, growing companies, it is common to receive a salary that only covers their basic needs, rather than one which reflects their full value or worth. This is often due to the financial strategy of reinvesting profits back into the company to fuel growth and stabilization. These owners may also have initially funded their company start-up costs by dipping into personal savings or securing loans, sometimes by using personal assets as collateral. In some cases, these businesses might receive support from angel investors, who provide capital in exchange for ownership equity.

When a businessman feels deserving of a raise but is hesitant to ask for it, the dilemma reflects the internal conflict between recognition of one's value and the fear of potential rejection or embarrassment. He may rationalize that his hard work will be inherently rewarding, which may be comforting but does not address financial compensation.

Small "Mom and Pop" businesses like inner-city grocery stores may continue operating even when not earning economic profits, supported by the owners' willingness to accept lower income for the sake of independence, community service, or lifestyle preferences. Although these firms may not be financially lucrative, they fulfill other personal or community needs that justify their existence.

Answer 2

The owners of small, growing companies often take minimal salaries to ensure business growth and stability, as initial funding may come from their own savings, loans, or angel investors. These modest salaries reflect a commitment to the business's long-term success, prioritizing reinvestment over immediate personal financial gains.

Step-by-step explanation:

It is fairly common for the owners of growing small businesses to take a salary that only covers their basic needs rather than their full market worth. This practice helps to ensure that the enterprise can reinvest the bulk of its earnings back into the business for growth, and can maintain financial stability in the formative years.

Funding for startups often comes from the owners' personal finances or loans secured by personal assets. Furthermore, angel investors may provide capital in exchange for equity. The willingness to accept a modest salary reflects a long-term vision for the business, an understanding of the financial risks, and a commitment to the company's future success.

Owners' salaries are typically low not because their work is undervalued, but because the business's sustainability and success is prioritized. This economic sacrifice in the present can potentially lead to greater financial rewards in the future as the company grows and becomes more profitable.