How Much Should I Pay Myself as a Business Owner?

This is one of those questions every business owner asks but nobody talks about openly. How much should you actually be paying yourself?

Pay yourself too much and you starve the business of capital. Pay yourself too little — or nothing — and you burn out and make desperate decisions.

The Profit First Approach

Instead of paying yourself whatever's left after expenses (which is often nothing), allocate percentages of every dollar that comes in.

Under $250K annual revenue: 50% operating expenses, 35% owner pay, 10% profit reserve, 5% taxes.

$250K - $500K: 40% operating, 35% owner pay, 15% profit, 10% taxes.

$500K - $1M: 35% operating, 30% owner pay, 15% profit, 20% taxes.

The Market Rate Method

Pay yourself what you'd have to pay someone else to do your job. If you're the CEO, head of sales, and chief marketer, a reasonable blended salary might be $70-90K.

When to Pay Yourself More

Increase your pay when your business has consistent positive cash flow, stable margins, at least two months of reserves, and doesn't need capital for immediate growth.

When to Pay Yourself Less

Temporarily reduce pay during high-growth phases requiring capital, when margins are declining, when cash is tight, or when preparing for major expenses.

The Number One Mistake

Thirty percent of small business owners don't take a salary at all. A business that can't afford to pay its most important employee isn't a viable business yet.

Your owner compensation directly affects your Profitability pillar in a Revenue Health Score. A business that only works if the owner works for free isn't a healthy business.