As an entrepreneur, you know that large piles of money and a luxurious life are just romanticised images of an entrepreneur’s salary. Johaness King, aspiring entrepreneur & ConTech enthusiast, told us in an exclusive interview that real motivation is your ‘passion for products, designing things and trying to understand people’s problems and find solutions for them.’

A business, especially in the first couple of years,  consists of hard work, staying up late, getting up early and working on weekends. This leads to the crucial decision that every business owner faces: whether you should pay yourself. We will discuss this question and show how to calculate your salary and when to start paying yourself.

Why should you pay yourself?

When you fully invest your time and resources in a venture, you will need money to cover expenses like rent and bills. That is when paying yourself an entrepreneur’s salary becomes critical.

When you pay yourself a fair and regular salary, it shows your commitment. It positively impacts your employees while indicating that you’re serious about your job and don’t regard it as a side activity.

Paying yourself a salary helps you manage your finances and find a precise balance between your personal and business expenses. It’s beneficial in the long run to define your company’s plans and assess your previous performance.

When you file your income as a business or individual, there are certain tax breaks to motivate you to expand your business. Keep reading to find out more about them.

How much should you pay yourself?

The amount differs based on industry, company size, type, and region. There is no magic number and formula. For instance, PayScale says, “the average income for a small business owner is around $65,000 per year.” While based on Glassdoor reports, “The national average salary for a Business Owner is $74,793 per year in the United States.”

To figure out the reasonable compensation, find how much the salary of an employee in a similar role in another company is. Suppose your responsibilities are way more than any other employee. In that case, you should figure out how much it would cost to outsource all of your tasks. That gives you a fair wage.

To find a reasonable figure, ask yourself how much you need to cover your basic living expenses. Come up with a figure that you can pay yourself regularly and consistently without risking unexpected expenses like when a customer pays late.

Another helpful way is to see what other entrepreneurs are earning. Salary calculators allow employees and business owners to submit and view salaries anonymously. These are some of our top picks:

Glassdoor: It is a reliable source for salary information in the Americas, Western Europe, India, the UK and Australia.

Indeed: Indeed is a worldwide job listing website with over 250 M visitors per month. You can review salary statistics based on job title and location.

PayScale: With “more than 10,000 customers from small businesses to Fortune 1000 global enterprises”, PayScale enables you to conduct salary searches based on industry and region.

LinkedIn Salary Tool: With a premium account, you can get a detailed breakdown of salaries by job title and location from the large LinkedIn community.

How much tax will you have to pay as an entrepreneur?

Tax rules for businesses and individuals differ.  If doing your taxes is not in your comfort zone, get professional help. Especially in countries with more tax complexities, it’s always a good idea to consult with an accountant or a tax specialist. Ask them about the tax laws and regulations that directly affect your company. Additionally, become familiar with the tax breaks that might apply to your company.

Find out about tax regulations in the country where you’re based. For example, in the United States, IRS is responsible for collecting taxes and informing individuals and businesses on regulations.

There are no universal tax solutions because tax rules differ by country and business type. However, these are some valuable tips you can use if you’re handling your tax for the first time.

  • Create and maintain a system of habits. It can be as easy as saving receipts and making a list of varied deadlines. Don’t postpone things you can do now. Make a plan and stick to it.
  • Put money aside for unexpected expenses. There are many surprises on your way as an entrepreneur, so be prepared.
  • Research applicable tax credits. You may find credits to help your business, especially after the COVID-19 pandemic, so be on the watch-out for them.
  • Invest in tax solution software. There’s now no shortage of accounting and tax apps. Choose one that’s suitable for your business size.

What is the time to start paying yourself?

You might have noticed that the money does not survive much in your bank account after paying business loans and employees at the end of the month. It’s normal, and you have predicted in your business plan and secured a time before your business takes off.

How long does it take, and when does the time ripen to pay yourself an entrepreneur’s salary? Having a balanced approach to income and results, far from the over-optimistic expectations, is the first step toward the answer. Ask established people in your industry how long it took for them. Your mentor can also inspire solutions to this question.

Start checking the cash flow and ask yourself if your business income is consistent. These are some other valuable strategies to consider before starting to pay yourself.

  • Draw a line between personal and business finances: this will make your tax life easier, make accounting much more manageable, allow you to get business loans when needed, and builds positive credit for your business.
  • Regular salary or owner’s draw: with a regular salary, you pay yourself monthly like your employees based on hourly work or at a flat rate. The owner’s draw is when you get money from profits after paying all the expenses.


When you pay yourself an entrepreneur’s salary, you cover your expenses and show your commitment. Finding a reasonable salary is possible by comparing your salary to others and choosing between a regular salary and the owner’s draw. Observe your accounting closely to find the best time to start paying yourself. Working for free to make the company profit is tempting, but don’t forget that your time is valuable.

About the author

EWOR is a school conceived by Europe’s top professors, entrepreneurs, and industry leaders. We educate and mentor young innovators to launch successful businesses.

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