Sacrifices, Salaries, and Surviving on the Bare Minimum

Starting a business is often a dream, but in Vermont, it’s a dream that comes with a hefty dose of financial and personal sacrifice. Before choosing a name or deciding what to sell, you need to understand what it costs to keep a small business alive here. From inflated real estate prices to rising labor costs, this article breaks down the real numbers behind owning a small business in Vermont—and why the rewards can still make it all worthwhile.

The Starting Line: What Every Business Owner Needs to Pay

If you’re planning to open a small business in Vermont and hire two full-time employees, here’s a realistic look at the costs you’ll face:

1. Employee Costs:
   • Wages: While Vermont’s minimum wage is $13.67 per hour, you’ll likely pay closer to $15/hour to attract workers. For two full-time employees, that’s $62,400 annually in wages alone.
   • Payroll Taxes and Other Costs: Employers should budget about 20% on top for payroll taxes and other mandatory costs, adding $12,480.
   • Total Employee Costs: $74,880 annually
2. Health Insurance:
   • Employer-sponsored health insurance for two employees costs about $11,000 per employee in Vermont, adding $22,000 annually.
3. Owner’s Salary:
   • To keep the business running while covering personal expenses, the owner may draw a lean salary. For this example, we’ll use $40,000 annually, which reflects a realistic minimum for many business owners in Vermont.
4. Operating Costs:
   • Rent: Even small commercial spaces in Vermont often cost $1,000/month, adding $12,000 annually.
   • Utilities: Heat, electricity, and other essentials add about $300/month, totaling $3,600 annually.
   • Professional Services: Accountant fees for tax preparation and bookkeeping start at $1,200 annually.
   • Miscellaneous Expenses: Insurance, supplies, and other essentials easily reach $10,000 annually.
   • Total Operating Costs: $26,800 annually
5. Profit for Emergencies:
   • To handle unexpected costs, a modest 5% profit margin adds $8,180.

Total Revenue Needed: Adding all these costs together, the business would need to generate $171,860 annually to stay afloat..

Service vs. Sales: What Would You Charge to Survive?

The numbers look different depending on whether you run a service business or a retail operation.

Service-Based Business: Adjusted Billable Hourly Rate

1. Total Billable Hours: Assuming 4,680 billable hours annually (3 workers × 1,560 hours each after accounting for non-billable time).
2. Required Hourly Rate:
   • Revenue Needed = $171,860
   • Hourly Rate = Revenue Needed / Billable Hours = $36.70 per hour.
3. Including Profit Margin: Adjusting for a 10% profit margin increases the revenue target to $189,046, requiring an adjusted hourly rate of $40.37 per hour.

Takeaway: To meet costs and turn a modest profit, service-based businesses need to charge $40–$45 per hour.

Retail or Product Sales: Adjusted Per-Unit Price

1. Annual Sales Volume: Assuming 10,000 units sold annually.
2. Required Profit Per Unit:
   • Revenue Needed = $171,860
   • Profit Per Unit = Revenue Needed / Units Sold = $17.19 per unit.
3. Including Cost of Goods Sold (COGS): If production costs (COGS) are $20 per unit, the total price per unit would need to be:
   • Per-Unit Price = COGS + Required Profit Per Unit = $20 + $17.19 = $37.19.
4. Including Profit Margin: Adjusting for a 10% profit margin increases the per-unit price to $38.90.

Takeaway: Product-based businesses need to price items at $39–$40 each for profitability.

The “Average” Owner’s Salary: Not Quite What It Seems

The average small business owner in Vermont earns around $141,535 annually, but the reality behind this figure is more complex.

• Taxes and Health Insurance:
  • After paying self-employment taxes (15.3%) and federal/state income taxes (28.6%), about $62,000 is deducted.
  • Add health insurance costs of $7,500, leaving the owner with about $72,000 take-home pay.
• Long Hours:
  • Most small business owners work 60+ hours per week. With 3,120 hours annually, the average hourly rate works out to about $23 per hour.
• Hidden Sacrifices:
  • Unlike employees, owners have no paid leave, job security, or employer-sponsored benefits. They assume all financial risks and shoulder every crisis, from staffing shortages to unexpected repairs.

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Building a Business in Vermont: Worth the Sacrifice?

Despite the challenges, owning a business in Vermont offers unique rewards. For many, it’s the only way to achieve financial independence while staying in the state they love. But as one seasoned Vermont entrepreneur puts it:

“You just have to roll up your sleeves, throw your life away for seven years, and work. Build your business. You need a strong accountant, an attorney, a banker, and a solid business plan to succeed. But it’s worth it.”

Conclusion: The True Cost of Vermont’s Business Dream

Starting a business in Vermont means more than just financial investment—it’s a commitment to long hours, personal sacrifice, and relentless determination. The numbers don’t lie: it takes a revenue of at least $171,860 annually to cover costs and stay afloat. And for those aiming for financial security, the sacrifices go far beyond dollars and cents. But for many, the freedom and fulfillment of owning a business in Vermont make it all worthwhile.

Dave Soulia | FYIVT

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