How to Pay Yourself Properly as a Business Owner (Without Stressing Yourself Out)
Let’s talk about something a lot of business owners struggle with but don’t always admit: Paying themselves.
Some business owners don’t pay themselves at all. Others take money whenever they need it and hope everything works out. And some overpay themselves without realising it’s hurting their business.
If any of that sounds familiar, you’re not alone. The good news? Paying yourself properly doesn’t have to be complicated……you just need a plan.
Why Paying Yourself Matters (More Than You Think)
Your business is not your personal ATM.
When money moves in and out without a clear system:
Cash flow feels chaotic
Taxes become scary
You don’t really know if you’re profitable
Burnout sneaks in fast
Paying yourself intentionally helps you:
Feel more in control of your finances
Know what your business can actually afford
Build a business that supports your life…..not drains it
A business that can’t pay its owner consistently isn’t as healthy as it looks.
Step 1: Know How You’re Supposed to Pay Yourself
This depends on how your business is set up.
Sole Trader or single-member LLC? You pay yourself through owner’s draws, not a paycheck.
Partnership? You’ll take draws based on your agreement.
Limited Company? You’re required to pay yourself a reasonable salary, plus you can take extra profits as dividends.
If you’re not sure which applies to you, that’s a sign it’s time to ask your accountant…..before tax season forces the issue.
Step 2: Separate Your Business and Personal Money
This step alone can change everything.
You need:
A business bank account
A personal bank account
Clear transfers when you pay yourself
Swiping the business card for personal stuff “just this once” makes it impossible to know:
How much you’re actually earning
If your prices are high enough
Whether your business is really profitable
Clarity comes from clean separation.
Step 3: Pay Yourself Based on What the Business Can Handle
Before deciding how much to pay yourself, look at:
Your average monthly income
Your expenses
Your profit (what’s left after expenses)
Here’s the key:
Pay yourself from consistent profit, not great months.
If your income goes up and down:
Start with a smaller, reliable amount
Increase it as your income becomes more stable
Consistency beats randomness every time.
Step 4: Pick a System That Works for You
Option 1: A Set Monthly Amount
This works well if your income is fairly steady.
Pay yourself the same amount each month
Pick a specific payday
Treat it like a bill your business must pay
It makes personal budgeting much easier.
Option 2: Base Pay + Extra Draws
Perfect for businesses with ups and downs.
Pay yourself a smaller monthly amount
Take extra money during strong months or quarterly
This protects your cash flow while still rewarding growth.
Step 5: Plan for Taxes (Seriously)
One of the biggest mistakes business owners make is forgetting that not all the money in the bank is theirs.
To avoid tax panic:
Set aside money for taxes before paying yourself
Move it into a separate savings account
Plan for quarterly taxes if needed
Future you will be very grateful.
Step 6: Revisit Your Pay as You Grow
What works now may not work forever….and that’s okay.
As your business grows:
Review your pay at least once a year
Adjust for new expenses or hires
Make sure your compensation still makes sense
Paying yourself properly is an ongoing process, not a one-time decision.
Common Mistakes to Avoid
Only paying yourself when there’s “extra” money
Taking random amounts with no plan
Forgetting about taxes
Undervaluing your time and effort
You didn’t start a business to constantly worry about money.
Final Thoughts
Paying yourself properly isn’t selfish…..it’s smart.
A business that pays its owner consistently is:
Easier to manage
Less stressful
Built to last
If paying yourself feels confusing or stressful right now, that’s a sign it’s time to create a clearer system. Your business should support you, not the other way around.