When running a small business, it is often a difficult decision to choose the amount to pay yourself. While there is no magic formula to determine how much to pay yourself, there are a few key points to keep in mind:
Focus more on reinvesting into your own business than taking a larger salary, especially in the business’s early years.
The notion of hourly wages evaporates. As a small business owner, you work all the time.
A good rule of thumb is to take a percentage of revenue or net profit, and increase that percentage as revenues grow. For example, perhaps you decide to take 10% of revenue as salary up to $500,000, then 15% after. If your business earned $700,000 this year, you would pay yourself:
*($500,000 x 10%) + (($700,000 – $500,000) x 15%) = $50,000 + $30,000 = $80,000