How much small business owners should pay themselves – CNBC

by | Oct 20, 2022 | Business

Many small business owners have trouble figuring out an appropriate take-home pay as the company expands, and some don’t pay themselves at all. These mistakes can easily come back to bite the founder and the business.Understanding how to pay yourself appropriately — even if it’s only a small amount that grows over time — is important for the long-term health of a business, according to professionals that advise small businesses. “It doesn’t reflect the true health of your business if you aren’t taking something,” said Zahir Khoja, chief executive at Wave Financial, a provider of money management tools for small businessesThe mechanics are especially important given that 26% of small business owners don’t pay themselves a salary, according to a 2022 small business survey from Wave. Here are four tips small business owners should consider when setting their take-home pay.Consider the total financial situation firstThere’s no one-size-fits-all answer. Founders need to consider factors such as their revenue and expenses including taxes, how the business is organized, and their personal financial circumstances. They should use this information to make a realistic determination of how much they could afford to pay themselves without starving the business. This will depend largely on the founder’s situation. Is there a working spouse? Does the founder have dependent c …

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