Understanding how business owners should compensate themselves is crucial for both personal financial stability and the growth of the business. Start by setting a reasonable salary that reflects your role and responsibilities within the company. It’s important to document pay decisions to maintain transparency and ensure compliance with any legal requirements. Regularly paying yourself helps maintain consistency in personal finances, while balancing immediate needs with long-term business growth. Additionally, aligning your compensation with performance metrics can motivate you to achieve business goals and drive success. Here is what experts have to say:
Set a Reasonable Salary
Paying yourself as a business owner can feel tricky, but it’s all about finding balance. Start by setting a reasonable salary based on what the business can afford and what’s fair for your role. Even if it’s modest at first, paying yourself consistently shows you value your work. Next, keep your personal and business finances separate. Run your compensation through payroll or through similar means as how you do with the entire team. Reinvesting in the business is important but you also have to make sure you’re paying yourself enough to stay motivated and focused. Finally, work with an accountant to make sure all the necessary stuff (taxes, bonus, fair team adjustments, etc.) are done effectively and efficiently. Also adjust your compensation as the business grows. The key is to value your efforts while keeping your business financially healthy.
Jamie Frew, CEO, Carepatron
Document Pay Decisions
When it comes to paying yourself as a business owner, one thing that has worked wonders for me is documenting my pay decisions. At first, it felt a bit formal—after all, isn’t one of the perks of being a business owner the flexibility? But over time I realized that treating my pay like any other business decision created structure and clarity.
Here’s what documenting looks like for me: I set a specific amount based on my business’s financial health, expected expenses, and reinvestment goals. Instead of guessing or being overly cautious about what I withdraw, I use numbers to justify my salary. It may seem silly when you’re just starting, but this kind of transparency is huge when you’re dealing with partners, investors, or even tax obligations.
For instance, when my business had a great quarter and I wanted to give myself a raise. The temptation was real. But because I had already documented my compensation plan—including a percentage of profits set aside for future growth—it kept me grounded. I stuck to the plan, reinvested in marketing, and saw even greater returns in the following months.
What I’ve learned is that this process doesn’t just keep the books clean—it changes your mindset. It’s no longer about sporadic withdrawals or feeling guilty for taking too much or too little. It becomes a part of running the business. And when your compensation decisions are intentional and documented it’s easier to separate personal finances from business finances which is a win for both your peace of mind and long-term growth.
Soubhik Chakrabarti, CEO, Canada Hustle
Pay Yourself Regularly
When I initially began paying myself from my firm, I found it difficult to balance honoring my work with keeping the company’s financial situation intact. One lesson I picked up right away was realizing that my pay should be seen as a component of the company plan rather than only a personal withdrawal. This kind of thinking changed everything.
I started by figuring out a fair salary depending on industry norms and the company’s financial situation. Rather than paying myself haphazardly, I set up a regular payment schedule that improved personal and company budgets.
Regular, consistent salary payments let me reinvest funds when needed and guaranteed that I wasn’t consuming too much during lean years. As the company expanded, I also developed a practice of frequently reviewing my pay.
I compensated myself modestly at first and prioritized reinvesting earnings, but I changed my pay to reflect the company’s success as revenues started to stabilize.
Erin Siemek, CEO, Forge Digital Marketing, LLC
Balance Immediate Needs with Growth
I learned the value of reinvesting in the business. By prioritizing efficient payment processes, we drastically reduced costs. A client even mentioned letting go of their classic payroll manager, reinvesting those savings into employee growth. It’s a validation that, sometimes, your compensation is effectively funding reinvestment in people and tech for sustainable success. Tying a portion of my compensation to performance was a game-changer.
For instance, when we significantly cut down the time it took to process payments, business moved faster, opening up growth opportunities. By linking my income to business performance metrics, I stayed motivated while ensuring the business had sufficient funds for expansion. Finally, think like a gig worker in your own business: stay flexible. Just like we offer fast, custom payments at Gig Wage, your compensation should adapt to the business’s needs. In the gig economy, payment cycles can vary – apply this concept to your compensation to balance cash flow and personal draw wisely.
Craig Lewis, Founder & CEO, Gig Wage
Align Compensation with Performance Metrics
Determining self-compensation as a business owner is about balancing personal remuneration with business sustainability. From my experience with Profit Leap, I’ve used the 8 Gears of Success framework to ensure my compensation aligns with the company’s performance metrics. For example, setting clear financial goals and reviewing them quarterly helps determine an appropriate profit disbursement, promoting both growth and stability.
Utilizing AI-driven tools like HUXLEY can provide data-driven insights into cash flow and profitability, enabling you to make informed compensation decisions. I’ve found tying compensation to strategic performance outcomes fosters accountability and aligns personal income with broader company success.
A key strategy is maintaining transparency with your executive team about the criteria for owner compensation. This ensures that personal gain does not compromise the business’s long-term health, particularly for startups looking for sustainable growth. Implementing a structured profit disbursement calendar, custom to your financial situation, reflects this balance effectively.
Victor Santoro, Founder & CEO, Profit Leap
Read more personal insights from our roundup experts on our business page.
