How to Pay Yourself as a Business Owner

One of my businesses had its best year on record. Best turnover we had ever done. And it paid me less than the year before.

The accounts couldn’t explain it. My accountant could explain it, of course he could. But getting me paid more was never his job. It isn’t anyone’s job. And that is the problem at the centre of this whole subject.

So this article is exactly what it says on the tin: how to pay yourself as a business owner. The actual order I use now, in my own companies and with the 100+ owners I have worked with. Because almost everybody has this backwards. You have been taught to grow the business and hope your pay falls out of the other end.

It doesn’t.

Revenue is vanity. Profit is sanity. And you went into business to get paid, not to build yourself a busy job.

Why Your Pay Was Never in the Plan

Look at your profit and loss like a queue.

At the top sits revenue — the money coming into the business, not into you. Then the costof delivering the work comes out. Then your overheads: salaries, premises, the bills. Then the taxman takes his share.

Whatever survives that queue is what is available to pay you.

Notice what has happened. The staff get paid. The suppliers get paid. The taxman gets paid. The bank gets paid. And the person carrying the risk for all of it is standing at the back with a bucket, hoping something is left.

That is not bad luck. It is arithmetic. Your pay was never in the plan in the first place, so growing the plan simply builds a bigger business that still doesn’t pay you.

This is why “grow the business” fails as an answer. Growth grows the queue. More staff to pay, bigger supplier bills, more tax, a bigger facility to service. Every line in the plan scales up except the one with your name on it.

You are better off owning a $1m business that pays you $200k than a $10m business that pays you $100k. It was never about the revenue.

How Business Owners Actually Get Paid: Salary, Dividends and Hours Back

There are three routes money reaches an owner.

Salary. Steady, and taxed as employment income. Useful, but chasing pay through salary alone keeps you thinking in time for money, and there are only so many hours in a week before the maths stops working.

Dividends. When the business has made a profit, the tax is settled and there is cash in the bank, that is the money available to pay you — or to reinvest for a bigger payment later. This is how most owners of profitable companies actually get paid.

Hours back. The route nobody counts. Time returned to you is compensation, and for a lot of owners it is the first form of payment available long before the numbers move.

None of this is financial advice — speak to your accountant about your own structure. It is what I have seen across my own businesses and the ones I work in.

But here is where most owners fall down, and it has nothing to do with tax rates: there is no structure at all. Pay is ad hoc. Whatever is left. Which is another way of saying it isn’t planned, which is another way of saying it won’t happen.

How Much Should You Pay Yourself? Start With Your Number

Start with the end in mind.

Not “I want a $10m business.” What is that for? A number with no life attached to it is just currency sitting in an account. Most millionaires don’t have a million in the bank — they own a million in assets.

So work out what your life actually costs. The house. The holidays. The car, if that matters to you. The time with your family, which for a lot of owners turns out to matter more than any of it.

I have sat with owners who told me they wished they had this conversation thirty years earlier. They think about the Christmases they weren’t present for, the people who got older while they were busy, and it lands hard. And then they ask the only useful question there is: what can I change now?

Sometimes the honest answer to “what’s your number?” is that the owner has already hit it and simply never noticed. They don’t need to grow anything. They need to go home earlier.

That is the number the whole plan should be built around.

The Cascade: Pay, Profit, Margin, Revenue, Price

Once you know your number, work backwards through five things. Pick the one that is broken and you will make more money.

Pay. What you want to take out, and when. Written down, not hoped for.

Profit. Where your pay comes from. No profit, no pay.

Margin. Where profit comes from. Profit and margin are not the same thing, and this is where most owners quietly lose their money — the margin is eating the bottom line long before anyone notices.

Revenue. Where everyone thinks the answer lives. The internet is saturated with how to make more revenue. It is almost silent on how to get paid from it.

Price. What sets your margin in the first place.

Somewhere in that chain the maths breaks. That is your constraint, and it is where your attention and your money should go.

Show Me Your Diary and I’ll Tell You What You’ll Get Paid

Show me your diary — last month’s, today’s, next month’s — and I will tell you roughly what the business will pay you.

Because the time you spend drives the behaviour you do, and the behaviour drives the outcome. If this year’s diary looks like last year’s diary, this year’s pay will look like last year’s pay. Usually worse, because your competition is getting sharper while you stand still.

Learning is not the problem for most owners. Learning multiplied by learning does not equal a new result. Ten percent of your effort should be learning. The other ninety is execution.

Here is the question I ask owners who won’t like the answer. Would you hire yourself? If you walked into the room every ninety minutes and watched yourself work, would you keep that person on? Would you look at them and think, that is someone who will be earning $500k in three years?

Behaviour correlates to the outcome. That is the uncomfortable centre of getting paid.

The Pricing and Discounting Trap

Price badly and you price yourself out of your own business.

Price like your competitor and you have given the customer no reason to choose you — so they will choose on cost, and you are in a race to the bottom.

And then there is discounting. Knock five or ten percent off a service when your overheads and costs of delivery are fixed, and you have taken that money straight out of the only pot your pay comes from. It is very often the reason there is nothing left for the owner.

Discounting is the easy way out. What is usually missing is the ability to sell. And the funny thing is, customers don’t want a discount — they want to feel they got more. Those are not the same thing. You can add something that is worth a lot to them and costs you very little, and the feeling is identical without the hole in your margin.

What If the Business Can’t Afford to Pay You?

That is not a dead end. It is a diagnosis.

Something is capping it, and it will be one of five things: demand, conversion, delivery, people, or money.

There is no demand. Or there is demand and you can’t convert it. Or you convert it and can’t deliver it. Or the people aren’t right. Or the money itself is the problem — the margin, the pricing, the structure we have just been through.

Find the one thing. Not seven. Not the shiny new thing that will distract you for a quarter while sales quietly dry up.

Owners resist this because they want their business to be special. The specifics always are. The theme almost never is. It falls into one of those five areas, time after time, and that is why the pattern is so recognisable once you have seen enough of them.

Making Your Pay Permanent

Profit that isn’t routed somewhere gets reabsorbed. That is how owners end up profitable on paper and still paid last.

So put your pay into the numbers. If you need $100k this year, $500k in three years, a million in five — that figure belongs in the budget and the plan, the same as any other cost the business has committed to. Your accountant may not love it, because that isn’t what they are there for. Set it anyway.

If your pay isn’t in the plan, it gets paid last. That is the whole mechanism, and it is fixable in an afternoon of honest arithmetic.

Paid Last Doesn’t Shrink as You Grow — It Multiplies

If you are reading this from inside a large organisation thinking it doesn’t apply to you, it applies more.

Scale the same foundation across a thousand people and it isn’t only the owner at the back of the queue. It is the senior team. The C-suite. And eventually the shareholders, because everything else has to be paid first.

Then the shareholders get fed up. They bring consultants in. They start pulling at every line. Redundancies follow, and nobody enjoys the version of the story where that happens.

Fix it early. It is far cheaper at $1m than it is at $100m

Listen or watch on your favorite platforms

Listen to the full episode: How to Pay Yourself as a Business Owner (Without Being Paid Last) — Mentor Business Podcast, Episode 123

Fed up of the business paying everyone but you? Message me your number — the pay it should be giving you. Every conversation I have starts there.

Know an owner whose business pays everyone but them? Tell them to talk to Dr Lewis Haydon.