“What should I be paying myself as a creative business owner?” This is a topic I get asked about a lot and there are a few different ways to look at it.

Pay yourself a percentage of your profit each month.
Pay yourself a fixed amount each month.

The truth is that paying yourself is not a one size fits all type of thing. What may work for one person may not work for you. You will probably need to do some trial and error to find out what works best.

First, you need to take a look at your business income and expenses.

In order for you to know how much your business can afford to pay you as the owner, you need to find out what your net profit is: Sales - Expenses = Net Profit

This ensures that you have enough money to cover expenses and continue to operate your business.

As the foundation of your owner’s pay, you need to review these numbers regularly.

Once you have your net profit, you need to factor in any business savings you would like to have and taxes (20-30% of your profit needs saved for taxes).

Now let’s look at the two different ways you can calculate your owner’s pay.

Percentage Based

One way of paying yourself is to take your net profit and allocate what you do with that money based on percentage.

In this case you would wait until the close of the month, run your profit & loss statement and calculate the amounts based on what percentage you decide would work best for you. Then that amount would be your pay for the following month.

This is a great option for those who have inconsistent income each month or those who are in the early stages of their business.

Fixed Amount

This version takes a little more planning on the back end, but it makes your personal finances a little easier because you know what to plan each month.

Essentially you will be doing the same calculations (Sales-Expenses=Profit) but instead of operating on how your business did the past month, you will be taking averages.

Ideally, you will take the average of your last twelve months of income & expenses to see what your baseline is.

Then add in any projected additional income and expenses. Be careful here, you don’t want to aim too high as you don’t want to hurt your cash flow.

Take the average net profit + the projected net profit to calculate your pay, keeping in mind you will need to save 20%-30% for taxes and potentially some for a business savings account.

Need help determining what you should pay yourself?

For some, this might sound like a lot to figure out on your own. That’s why I am here as your bookkeeping BFF. Consider bringing on a bookkeeper to your team to help ease the stress and overwhelm when making business decisions like this.

Click here to see how monthly bookkeeping can benefit your business.

For information on HOW to pay yourself, check out my blog post, How to Pay Yourself as a Creative Business Owner?