How much salary should you take?

Grab a pen. This one takes two minutes.

Most founders pick their salary one of three ways: what they earned at their last job, an “average founder salary” they found online, or nothing at all.

None of them comes from your business.

So let’s find a number that does.

First, are you ready?

Before you pick a number, check these:

• Your cash flow has been positive for 2 to 3 months in a row, without delaying bills to get there.
• After adding your salary, you’d still have at least 3 months of costs in the bank.
• Everyone else gets paid first: employees, vendors, and taxes.

If any of these aren’t true yet, you’re not ready to start. Make them your first target.

Now, find your number in 4 lines

Line 1: Your floor.
What you need each month for rent, food, insurance, and basic living costs, plus a little extra for taxes.
$______

Line 2: Your average monthly profit.
Over the last 3 months, after all operating costs, not counting your own pay.
$______

Line 3: What the business can support.
A reasonable starting point is 10–20% of Line 2. Lean toward 10% if your profits still swing a lot, and toward 20% if they’re steady.
$______

Line 4: Your gap.
Line 1 minus Line 3. If it’s zero or less, your floor is covered. If not, that’s the number to build toward.
$______

Here’s one filled in

• Line 1: You need $3,750 a month.
• Line 2: Your business averages $15,000 a month in profit.
• Line 3: 10–20% of that is $1,500 to $3,000. Your profits have been steady, so you start at $3,000.
• Line 4: $3,750 − $3,000 = a $750 gap.

That’s $36,000 a year to start, with a $9,000 gap to close.

Why so low? Even steady profits are still new. Keeping the rest in the business builds the cushion that keeps you paid when a slow month hits.

And that gap isn’t a reason to keep waiting. It’s a target. You close it one of two ways: profit grows (at about $18,750 a month, 20% covers your full floor), or once profits have stayed steady for longer, you take a bigger share.

3 things to know before you use it

Your pay can flex. Take a little more in strong months and pull back in slow ones, instead of locking in an amount the business can’t always carry. Review the number every quarter.

Check where you’re heading. Ask yourself what it would cost to hire someone to do everything you do. You don’t need to pay yourself that yet, but it shows what you’re building toward.

If you need to pause, do it on purpose. Write down why, and set a specific restart trigger, like “when monthly revenue stays above $X for two months in a row.”

(How you pay yourself depends on your business structure. Sole proprietors, partnerships, and standard LLCs usually take an owner’s draw. S-Corp and C-Corp owners are employees, and S-Corp owners must pay themselves a reasonable salary. Check with your accountant.)

In a nutshell

Your starting salary is what your business can support, not what you’d like to take.

If that’s less than you need, the gap isn’t a reason to wait. It’s your target.

Run the four lines again every quarter, or add your salary to your forecast in Upmetrics and see exactly when the gap closes.

Until next time,

Happy business planning 🙂