An excellent question asked by all new business owners. The answer lies in understanding overhead. Overhead is defined as all administrative, marketing, vehicle, office space, utilities - the basics that it takes to run a business. This category should never contain a cost of goods sold, for instance something directly related to creating sales such as inventory or payroll.
To determine an appropriate draw, look at a span of time 6 months or more on the Profit and Loss - the longer the period the increased accuracy. This is because insurance premiums and property taxes are paid just once or twice a year. Determine the monthly average for Overhead. Now take a look at average sales and factor in what you really expect to happen. Cost of Goods Sold can be shown as a percentage of Sales so once you remove that and Expenses/Overhead you can realize net profit.
Sales - Cost of Goods Sold (Direct Costs) - Overhead = Profit.
Often 10-20% is retained for capital investments but it depends on the status of your business and your goals. Congratulations you've now deducted an appropriate Draw.
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