Are You Paying Yourself?

I have asked this question in countless coaching sessions with entrepreneurs and business owners. And all too often, the answer is a hesitant “Um... yes... sort of... well, not really... no.” As founders, we become so focused on getting our business idea off the ground that we are willing to sacrifice almost anything to make it happen. We pour our time, energy, and money into our businesses, constantly reinvesting profits (if there are any), hiring people, purchasing equipment, or scaling up operations. But what often gets sacrificed along the way? Our own financial stability. And the downstream consequences of that can be significant.

I know this from personal experience. I gave up a secure job paying over £100k a year to start my own business. And that business? It paid me exactly £0. Zero. Zilch. Nada. For years! I was fortunate to have some savings to get me through those early days, but not without consequences. I significantly limited any discretionary spending for myself and my family. Evenings out, new clothes, trips to Starbucks - none of that. We had to make every penny count, and that kind of financial restriction can take a toll. And as for the strain on my relationship with my wife, well, that is a subject for an entirely different article - but it is a consequence I hear all too often from other founders.

So, why do we not pay ourselves?

1. Psychological Factors at Play

First, there are psychological factors at play here that we need to acknowledge. We pour everything into our businesses, telling ourselves that reinvesting every penny is the only way to succeed. If we just keep pushing, if we just give it everything, eventually, it will pay off. Right? But what happens in reality is that we convince ourselves we will get paid later. “Once the business is stable, I will take a salary.” But that day keeps getting pushed further and further away. That “eventually” becomes an endless cycle, and it never seems to come.

Then, there is guilt. There is this persistent sense of guilt that if we take a salary, we are somehow hurting the business or slowing down its growth. We worry that paying ourselves could mean not having enough to hire someone else, invest in marketing, or cover essential costs. It feels like taking money out of the business might compromise its future, and that can feel selfish. We even start to believe the myth that not paying ourselves is just part of the entrepreneurial journey. It is what being a startup founder is all about, right? Sacrifice, hustle, grind - all in the name of eventual success. But this mindset can become toxic, leading to burnout and personal financial strain.

2. We Do Not Know How Much to Pay Ourselves

Another major reason we do not pay ourselves is that we simply do not know how much to take. We get stuck in this space between what we need to live, how motivated we are to keep pushing, and how much the business can afford to give us. It is a balancing act. Take too much too soon, and you could shorten your runway - the cash you have to keep the business alive. Take nothing at all, and you are left personally struggling, which impacts your mental health, your motivation, and ultimately, your decision-making as a leader.

So how do we find that balance? It starts with identifying your baseline: what do you need to cover your basic living expenses without putting unnecessary strain on the business? Take stock of your rent or mortgage, bills, food, transport, and any essentials for your family. This is not about paying yourself lavishly - it is about ensuring you can sustain yourself and your personal life.

Next, assess your business’s cash flow. How much revenue is coming in, and what are the necessary operating expenses? After covering essential costs, how much is left? What is a reasonable percentage you can take as your own salary while still reinvesting enough back into the business to keep it growing?

3. A Process for Paying Ourselves

Once you have figured out how much to pay yourself, the next step is to create a process that ensures it happens. And it is critical to have a system in place to make paying yourself a habit, not something you do on an ad-hoc basis whenever there is a bit of spare cash lying around.

One effective approach is the Profit First method. In this system, you pay yourself first before covering any other business expenses. Here is how it works: every time your business earns revenue, you immediately allocate a percentage of that income for your salary. You can set aside other percentages for business expenses, taxes, and savings, but the key is that you come first. By doing this, you build paying yourself into your business’s financial model. It stops being an afterthought and becomes a priority. And this does not mean you are short-changing the business. Instead, you are ensuring its long-term sustainability by making sure the person running it is financially secure. It is about creating a healthy balance that allows both the business and the entrepreneur to thrive.

Start small if necessary - even if it is 1% of the revenue at first, it gets you into the habit. Over time, you can adjust that percentage as the business grows, ensuring that both you and the business are adequately supported. To make it easier, automate this process. Set up regular payments to yourself on a specific date each month. This creates consistency and ensures you are not tempted to skip it when things get tough.

Final Thoughts

Paying yourself is not selfish - it is necessary. Your business relies on you to lead it, make strategic decisions, and steer it through challenges. If you are not financially stable, it is harder to make those decisions with a clear head. Start small if you have to, but make sure you are consistent. Do not wait for the perfect moment when the business feels “ready” to pay you - that moment might never come.

Key Takeaways

• Identify your baseline: Figure out how much you need to live comfortably without overstraining the business.
• Balance personal pay and reinvestment: Do not starve the business, but do not neglect your personal finances either.
• Set up systems: Use methods like Profit First to pay yourself consistently and automatically.
• Start small, but make it a habit: Even a small percentage can grow over time, and it sets a strong precedent for the future.