My food truck booms in summer and stalls in winter. How do I pay myself?

The question

An illustrative letter.

The answer

My dear, feeling rich in July and broke in January is not a sign that your business is failing. It is how a seasonal business behaves when nobody has told the money to wait. The truck is doing its work. Now the money needs a little order, so that you feel the year as a whole and not month by month.

Why does a seasonal business feel like feast or famine?

Because you are paid the way the weather is. In a good summer month the account fills up, and it is natural to spend as though every month will look like that. Then winter comes, the truck sits, and the bills do not stop: insurance, permits, storage, loan payments and your own rent and groceries.

The answer is not to earn more in summer, though that helps. It is to stop treating summer money as summer money. Every dollar the truck clears belongs to the whole year.

How do I work out a steady monthly pay?

Start with last year's records. Your bank statements will show what the truck cleared each month after costs. Say it cleared $8,000 in each of four summer months, $3,000 in each of four spring and fall months, and close to nothing in the four winter months. That is about $44,000 for the year.

From that, take out a share for taxes. Many self-employed people set aside 25 to 30 percent, so say $11,000. Then take out the business costs that keep running while the truck is parked, if your monthly figures did not already include them. What is left, divided by twelve, is a salary the business can carry. In this example, $33,000 a year comes to $2,750 a month.

In your first year of doing this, pay yourself a little less, perhaps $2,500. A slower summer, a breakdown or a wet June can all happen, and the cushion protects you while you learn your real numbers.

If your records from last year are thin, make your most careful estimate from what you remember and what your bank shows, and use the lower end of it. One full season of keeping proper records will give you a far better figure, and you can raise your salary then with confidence rather than hope.

Where does the money wait between seasons?

Three accounts make this simple:

• The business account. Every sale goes in, every business cost goes out.
• A tax account. A share of each week's takings moves here, for taxes only.
• A pay reserve. Whatever is left in summer, after costs, tax and your salary, moves here.

On the same day each month, your salary moves from the business account to your personal account. In summer the business account covers it easily, and the extra flows into the reserve. In winter, the reserve tops the business account up so your salary can still be paid. You stop feeling rich or broke. You simply get paid.

By the end of the busy season, the reserve should hold enough for every slow month's salary plus the winter running costs. In the example above, five slow months at $2,500 is $12,500, before those costs. If you are short, you know in September, while there is still time to do something about it, not in February.

What about taxes on an uneven income?

When you work for yourself, the IRS generally expects tax to be paid through the year in four estimated payments, due in April, June, September and January. With a seasonal income, equal payments can feel awkward, because the money arrives unevenly. There is a way to match your payments more closely to when you earn, but it takes some care to work out. A CPA can tell you how it applies to you, and whether your business structure changes how you pay yourself.

With the tax account filling every week, each payment becomes a transfer rather than a scramble.

What if this year is slower than last?

Look at your numbers at the end of each season, not only at year's end. If the reserve is behind, lower your salary a little for the coming months, before the money runs out rather than after. If the year is better than expected, resist raising your pay straight away. Let the reserve grow first, then raise your salary for next year, once you know the good year was real.

Can the quiet months earn something?

Some owners keep a little income coming in winter: catering private events, holiday markets, indoor festivals or a regular lunch spot at a large workplace. Even a few bookings can cover the winter running costs, so your reserve only has to cover your pay. Weigh each one against what it costs to run the truck that day.

Your truck has a season. Your paycheck does not have to. Let summer quietly pay for winter, and the whole year will feel steadier, at home as well as at work.

One thing to do this week

Pull last year's bank statements and write down what the business cleared in each of the twelve months.