Are You Paying Yourself Enough? Knowing When to Raise Your Salary

We’re hearing a lot about fair wages nowadays, but this issue isn’t just about Amazon and other big corporations. It affects small business owners too — and maybe not in the way you think.

In fact, many of us small business owners do a great job paying our employees and contractors fairly because we want to do things differently than the corporate world. 

But what about your own salary? Are you paying yourself enough?

So, how much should you pay yourself? And how do you know when it’s time to give yourself a raise? 

I know how stressful it can be — especially if you don’t feel like your business finances are solid. So I’m going to walk you through figuring out when and how to pay yourself more without risking your business’s profitability.

And of course, you already know where we’re gonna start — with your books! You’ve got to run the numbers to figure out how your salary fits into your business’s overall finances.

So pull your latest P&L, grab a calculator, and get cozy with your favorite drink — let’s figure this out!

The emotional aspect of paying yourself

We all know it — money can be an emotional topic. And that’s especially true when it comes to deciding on your own salary.

But here’s the thing — you’ve got to make financial decisions (especially for your business) based on the facts, not your emotions. That means looking at your numbers objectively and being as logical as possible when it’s time to make decisions.

How much do you want to pay yourself?

Let’s start with the real question — how much do you want to be paying yourself? Sure, we’d all probably love to be millionaires, but this particular question is a serious one that deserves significant thought and an honest answer.

Ideally, how much do you want to bring home as your salary or owner’s draw? Or maybe it makes more sense to ask how much you need to bring home.

If you’re the primary breadwinner in your household, for example, you need to make at least enough money to cover all the bills, buy food, and pay for other living expenses. But if your business is a side gig or a part-time endeavor, you might just want to make enough to cover daycare, pay some of the bills, or save for vacations.

So, sit down, be honest with yourself, and do the math. Once you know how much you want to pay yourself, you can look at your business finances and figure out what’s possible.

How much can you afford to pay yourself?

OK, you know how much you want to pay yourself — is that amount feasible? This is where your P&L comes in.

So pull your latest profit & loss report and look at the numbers. Can you afford to pay yourself the amount you want? 

The numbers will tell you. Look at your revenue and expenses, and remember that profit equals revenue minus expenses. So if you want to pay yourself more (which means higher expenses) without affecting your profit, you’ve got to increase your revenue. Here are some possibilities:

• Building your brand and connections to attract more leads
• Upgrading your website and social media presence to drive conversions
• Developing new offers
• Changing your pricing

These are just a few possible ways to increase your revenue.

Another option is to decrease your expenses so you have more leeway to increase your salary:

• Drop software subscriptions you’re not using
• Lower the number of tasks you’re outsourcing
• Evaluate your team members to make sure you can afford them (Be careful here — these are humans who deserve compassion and respect, so make sure you’re giving this decision the weight it deserves.)

Make sure to look at the long-term financial state of your business. Are you consistently dipping into your cash reserves to pay yourself? That’s not sustainable. Those savings should be for things like taxes and planned time off.

Are your finances overwhelming?

Looking at your business finances can feel overwhelming, especially if the numbers aren’t matching up with your goals. If you feel yourself spiraling into negative emotions, take a step back and narrow your focus a bit.

You don’t have to change all the aspects of your revenue and expenses at once. Instead, make it more manageable with a long-term plan:

1. Make a list of all the changes you want to make to your revenue and expenses
2. Pick one thing from that list to focus on each week (I like to call this a Weekly Profit Focus)
3. Spend your time and energy on that one thing for a week (or a few weeks, if necessary)

Focusing on one thing at a time can help you feel empowered instead of overwhelmed. Plus, it allows you to give each task your full attention and energy, so you can complete it successfully.

Handling the “what-ifs”

It’s easy to get distracted and even scared about the what-ifs. What if increasing your salary isn’t sustainable? What if it’s the wrong decision for your business? What if you really need more income to cover your bills and it’s just not there when you look at your numbers?

Instead of getting derailed by all the negative possibilities, focus on the positives. You’re an entrepreneur, and entrepreneurs are resilient. We’re problem-solvers. We do what it takes to figure it out and make things work. 

So when you feel those doubts creep in, remind yourself that you can handle it. Then, go back to your numbers, look at them honestly, and make objective decisions based on logic, not emotions.

Progress is progress

If you want to raise your own salary, you might need to make some changes in your business. So make a list of ways to increase revenue and decrease expenses, and focus on one thing at a time.

It’s OK if progress feels slow — it’s still progress! Every small step counts. And maintaining that perspective can help you overcome the doubts and fears that sometimes sneak in.

Not sure which small step to start with to make your business better? I’ve got a suggestion — get your books in order! ? Maybe you set aside time every Friday to check in with your books and see how things are going. Or maybe you block out half a day each month to go over your monthly P&L. The key is consistency — so find what works best for you.

Don’t want to spend time managing all the ins and outs of your books? My team and I are here to help! We’ll take care of tracking your transactions and creating meaningful reports, so you have all the information you need to make the right decisions for your business. 

And even more importantly, we’ll help you navigate the emotional aspects of running a business. Because we know exactly what it’s like — and we truly care about each of our clients. We’re here to give you the support and tools you need to run your business confidently.

When you work with us, you’ll get

• Clear, easy-to-understand monthly reports explaining your revenue, expenses, and profits
• A complete library of digital resources on finances and bookkeeping
• Quarterly Loom videos made specifically for you with step-by-step walkthroughs on how to get the most out of your reports
• Colorful graphs, charts, and visual reports that are way more helpful than boring spreadsheets
• Access to the Madison Dearly team via Voxer — we’re here to answer your questions and support you!

Interested in that kind of support for YOUR creative online business?