How Much Should I Pay Myself as a Small Business Owner? (Simple Step-by-Step Method)

Apr 02, 2026

If you’ve ever opened your business bank account and thought:

“Can I afford to pay myself right now?”

You’re not alone.

This is one of the most common (and stressful) questions small business owners have.

And the truth is — most business owners are guessing.

Take it from me. I’ve been a bookkeeper to 50+ businesses over the last 10 years and I would say the majority of those businesses were guessing A LOT OF THE TIME.

They look at their bank balance, transfer some money, cross their fingers and hope everything works out.

But that’s exactly why running a business that way can leave you feeling so uncertain and stressed out!

Let’s fix that.

Why Crunching the Numbers Feels So Confusing

Most business owners were never taught how to actually decide what’s safe to pay themselves.

So they rely on:

their bank balance
their revenue
or their gut instincts

The problem?

None of those things tell you what’s actually yours and safe to spend.

Your bank balance doesn’t account for:

Upcoming overhead expenses
Loan payments
taxes
or your true profit

And revenue?

That’s just what came in — not what you get to keep.

The Simple Way to Calculate Owner Pay

Instead of guessing how much you can pay yourself as a small business owner, use this 4-step method:

Step 1: Look at this month’s Revenue

Start with what actually came into your business.

Write down your total revenue from this month.

This is great to do at the end of the month. If you’re reading/watching this mid month you can do this using last month’s data. That works too.

Lets use some real numbers.

Lets say I have a marketing agency business and I’ve made $14k in revenue so far this month.

Step 2: Subtract All Business Expenses So Far

Now subtract everything that you’ve already paid for when it costs to run your business for the month:

software
contractors
marketing
subscriptions
any recurring costs

So far i’ve spent $2,600.

Step 3: Account for What’s Coming Next

Before you pay yourself, look ahead.

Ask:

What expenses are coming up in the next 2–4 weeks?

Subtract those as well.

This number plus the number from step 2 (or your combined monthly costs) is what is commonly referred to as your monthly “nut”.

Knowing this number will help you determine your real profit, not just income.

I have another $1,600 in expenses coming up.

Step 4: Leave a Cushion

This is the step most people skip.

You should always keep a buffer in your account.

A good starting point is:
👉 1 month of business expenses. I like to plan for the worst so I keep 3 months worth.

This creates stability and removes stress that might cause you to make poor money decisions.

I already have a good cushion built up, but i’m going to put another $1k in my savings cushion.

Step 5: What’s Left Is Your Safe Pay Range

What’s left after all of that?

That’s what you can safely pay yourself.

Not your full bank balance.

Not your revenue.

Your profit — after everything is accounted for.

And in this example, I have $8,800 leftover. So i’m going to take a $5k paycheck this time. And i’ll still have some leftover incase something happens.

The Biggest Mistake to Avoid

The #1 mistake I see:

👉 Paying yourself from revenue instead of profit.

This is why so many business owners:

feel stressed after paying themselves
avoid paying themselves altogether
or constantly second guess their decisions

Remember, profit is what you keep. That’s what you pay yourself from.

The Real Goal: Consistency, Not Perfection

You don’t need to:

get this perfect
or calculate everything down to the dollar

You need consistency.

The goal is to move from:
“I hope this is okay…”

to:
“I know this is safe.”

Want This to Feel Easier?

If you want a simple, repeatable way to:

calculate your owner pay
increase your profit
and build toward $100k/year

I created a step-by-step system for this called:

👉 The $100k Paycheck Formula

It walks you through exactly how to:

know your numbers
set your monthly targets
and pay yourself consistently

Click HERE to get started.