Money Culture

As a business owner, should you be on the payroll?

For many business owners, figuring out how much to pay employees is a semi-regular task.

But what about you, the business owner: how much should you get paid?

Business owners rarely spend as much time deciding on their pay as they do on their employees.

If that's you, it's time to sort that out...

In my experience, the first one to five years of being a business owner, especially a self-funded start-up business (i.e most small businesses!), results in the business owner getting paid very little.

In those early years, nearly every available dollar is used to grow the business by finding more customers or investing in other things to build your base.

The reality is that, in the start-up phase, you will likely get paid less as a business owner than you used to get paid as an employee in someone else's business.

That's normal and part of the investment you'll likely need to make.

But, once you're past that initial start-up phase that can last up to five years, I strongly recommend you pay yourself an appropriate salary.

What's an appropriate salary for you as a small business owner?  That's your choice!

You can figure that out in many ways, and your decision is nearly always an appropriate option.

If you're unsure where to start, there are three options for you to consider below, but first, a warning: DON'T skip over this critical step of paying yourself a salary.

Too many business owners that I know only pay themselves from the profits made from their business.

This approach can be justified in many ways, including the tax advantages it provides you and your family.

But profits in small businesses are variable, and often unpredictable.

Your employees get paid every week or fortnight.

They have stability and consistency in what they get paid.

They have peace of mind over their income.

So should you.

Not knowing when or if you will get paid is stressful.

A stressed business owner is usually a stressed wife, mother, husband, father or partner at home.

No one wants a stressed partner in their life.

And no employee wants a stressed business owner as their boss.

Don't take that risk.  You're trying to build a strong team culture, the last thing you need is to be the one that's tempted to take short cuts from money stress.

Even if you've been consistently making profits for the last few years, if you work in your business, I recommend you pay yourself a salary, like your employees get.

It creates stability in your personal life AND connects you closer to your team: we all get paid fortnightly.

Your business has a culture, including a money culture. When the business owner gets paid in the same way as the employees, a more connected culture is in place.

And, of course, as I wrote over here, if you're a business owner, you pay yourself an appropriate salary and, you have more money coming in to your business than going out, you are a success.

So, what should a business owner pay themselves?

OPTION 1 - The Bare Minimum. Most business owners start their salary at the bare minimum. That is, the very least they can pay themselves AND be self-sufficient at home. Enough to pay for your housing and the basics of life. That's it. The bare minimum for you to exist.

OPTION 2 - Middle of the Road. Many business owners pay themselves a salary similar to what their employees get paid. That is, if you're a trained architect who owns and operates an architectural firm, you pay yourself the same salary as a mid-career architect would get paid in your business.  That salary is higher than some of your employees, and probably less than what your most highly paid employee gets paid.  It's a safe option. It's more than the bare minimum.  It's less than what you're worth.

OPTION 3 - What You're Worth. Very few business owners pay themselves a salary that their skills and experience could get elsewhere. If any of your employees left, you'd replace them with a similar employee on a comparable salary. The same should apply to you. If you stopped working as an employee in your business, what salary would be needed to employ someone for your job?  That salary is likely the highest salary of all the employees in your team.  If you are a skilled, obviously hard-working business owner, your employees will expect you to be paid more than they are.  You're worth it.  Meet those expectations.  This is the option I choose.

What's an appropriate salary for you as a small business owner?  That's your choice!

Keep at it.

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PS - In 2025, I am working with small business owners to simplify and strengthen their business culture.  HERE's how I could help you.