How I pay myself in my small business

How I pay myself in my small business


I am not sure how other businesses go about this. And I am NOT a financial advisor. There is so much I still don’t know and am figuring out. This is just my personal experience and how I run my finances in my business. So please do your own research or hire a professional if you need to. I am still a newbie at all this BUT I have figured out somethings that I believe might be very helpful to others and I haven’t really heard much about this thinking (other than a Pinterest post I’ll mention in a bit).


So a turning point occurred when I realized in my second year of business that my business was making money but I was not paying myself.


Let me explain.


With the business, I have business expenses, business taxes and so forth.

But I wasn’t taking any of that profit into my own personal account. It wasn’t affecting me at all. I was just so excited to see any amount of money I was making with my business.

So I was supporting my business but not my family. Yep.

So that was quite the realization.


Feeling ridiculous I realized that firstly it’s okay because businesses take a while to start anyway.

I have heard different numbers used in this quote but it goes something like this: “expect your business to take 3-5 years for your business to be successful (meaning profitable)”

Or I’ve heard 10 years to make a living. Numbers like that can feel depressing or they can feel liberating. Don’t give up after your first year or first few years.


So with all that in mind I gave myself grace and found a way to move forward.


The method I found was actually from a Pinterest post. The post was from another business owner. She said when she gets “paid” she splits the money by percentages.

50% to herself. And then keep 30% in the business Checking account . Then 15% in a business savings for taxes and 5% to another savings account for your business. I have used that savings for things like vendor fees or cost to print when I was low in my checking.


Now I use these percentages at the same amount. And something to note that this formula will not work if your business expenses are too high.

So it is worth playing around with.


For an example, although how I price my work varies if it’s an original or art print or a greeting card etc. there is a formula I use typically.

A very brief insight to my pricing is that yes my method to price things vary. Depending on the product I do product research to see what is typical price point so that I am not asking too high or too low. But a pretty steady rule for me mostly in regards to art prints is I take the cost of goods for the product (what I am spending to make one print at that size) and I multiply it by 3. Sometimes a print will be a little over but I try to never go under that. The reason is because I need to pay for the product and I need to pay myself and my business needs to grow not just stay at the same place. Another reason is so that I can sell wholesale.

Wholesale products are sold in bulk but at 50% the cost of your retail price for the product. So if the price point is less than cost of good X 3, then I won’t make profit potentially at all from wholesale.

I need to check in on these numbers all the time to make sure I am pricing things in a way that isn’t hindering my business but helping it to grow.

So that’s my brief pricing memo. 


So back to these percentages and paying myself.  Honestly it has been great and very helpful!

But what I still needed to figure out was how to record all of this. How to categorize it for taxes and my own profit records and when to break down the income into its percentages, weekly, bi-weekly?


So for the later I thought about calculating it all once a month but that didn’t make sense cause no one wants to get paid only once a month. That’s not practical.

So I mostly transfer money from my business checking into my personal account and to the 2 savings accounts either weekly or after each sale,  I.e., each commission or market or even after each online sale. I can do that after the online sales because I don’t get that many sales that way right now.

So that’s what works for me at this time.


Next thing is how to categorize it. I use quickbooks and I love it! (Not sponsored) however there was and still is so much I don’t know. Learning to categorize your expenses and income is very important.

Few things I have learned in that regards is “owners draw” is what you categorize it when you pay yourself.

And something I didn’t do initially is make accounts on QuickBooks for those savings. So now I categorize them as transfers instead of owners draw or expenses because they are still money you intend to use for your business, they are just transfers.

If you find you don’t know what to categorize something as you can google it pretty easily. Or they have book keepers I haven’t used them but I’m sure that would help a lot as well. There is a small business book keeper I met here on Hawaiʻi Island that I talked with over the phone once and she was extremely helpful so if you’re on island and looking for a great small business book keeper I can share her info.


Anyways I am sure I will add more to this later when I learn and understand more myself. But I wanted to share because I believe us small businesses and artists can really help each other by sharing our experiences and hard earned lessons.


Hope this helps you along your way!

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