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As a Business Owner, How Do I Pay Myself?
- Jose Alvarez, MBA
- Jun 17
- 4 min read
Updated: Jul 23
A client of mine asked me this one and it's surprised me. Not because I hadn’t heard it before, but because it’s one of those things nobody ever really teaches you and it hadn't come up before:
“How the hell do I pay myself? And how do I know if it’s the right amount?”
He owns a very specialized agricultural operation and keeping my client's privacy is important... But the story? It’s not uncommon.
Like many in agriculture, he inherited the operation from his parents a few years back and has absolutely poured himself into it since - reinvesting millions of dollars in personal assets and business earnings. He’s grown the business, upgraded the equipment, improved the facilities, hired more workers, expanded product lines, and increased production.
It’s thriving.
And yet… this was still the question:
"How do I pay myself?"
Most Entrepreneurs Just Guess—Until They Can’t Anymore
Up until that point, he’d been taking an annual draw - more of an educated guess than a strategy. There was no real structure to it. No benchmark. Just, “I hope this is right.”
I get it. I’ve lived it. When you’re self-employed, everything flows through you and sometimes it feels like you’re both the bull and the farmer.
Here’s how I approach it in my own firm:
Gross Revenue × 50% = Owner’s Income
Then:
Gross Revenue - Taxes – Rent – Marketing – Professional Associations – Insurance – Utilities – Software – Office Supplies – Misc = Profit or Loss
Gross Revenue – Owner’s Income – Taxes – Rent – Marketing – Professional Associations – Insurance – Utilities – Software – Office Supplies – Misc = Retained Earnings
From there, I check in quarterly: Can I take more without wrecking my 3- or 5-year goals?
If yes, I take a little extra.
If no, I wait.
Simple, but it works.
Is That Formula Right for You? Maybe. Maybe Not.
My income is quarterly and consistent because of how financial advisory fees are structured. But you might have uneven cash flows from retail sales, milk checks, project or construction bids, employees to pay, uneven seasonal fruit sales, government contracts, or cull cow runs.
Your income rhythm likely looks totally different from mine, so this isn't a one-size-fits-all approach. Remember that the 50% rule I currently go by may not be universally appropriate.
Industry Norms Differ: In some industries, especially those with high overhead (think medical practices, manufacturing, or firms with multiple employees), paying the owner 50% of gross revenue could be unsustainable.
Growth Phase Risk: If your company is in a growth or reinvestment phase, taking 50% off the top can starve your business of the cash needed for hiring, technology, or expansion.
Feast-or-Famine Risk: For businesses with irregular or seasonal revenue, taking 50% every month could leave you short during lean periods.
Trying to figure out how to manage and scale the thing you've built is tough and managing the business is something easily avoided. Because that’s where the anxiety creeps in. And if you’re being honest, that’s the part you probably avoid the most.
You Work the Business. But Do You Work ON It?
I run a wealth management firm and a small cattle ranch. And I know exactly what feels good in both.
Working the business means meeting with families, building financial plans, solving real-world problems. It’s also walking my pasture and fence line, hauling feed with my son, or heading to the auction to buy the next steer.
But working on the business?
That’s reconciling books, tracking mileage, managing profit and loss, figuring out pricing, and paying vendors. The shit no one really likes to do when it comes to managing the business but are crucial to its success.
Nobody becomes an entrepreneur because they love bookkeeping or tax planning. They do it because they’ve got something they love to do or make, and it just happens to be a viable business.
So, You’ve Got Two Choices
Carve away the time needed to figure these things out yourself instead of doing the thing you love.
OR
Hire someone to do it for you, so you can double down on the stuff that fulfills you.
Whether it’s retirement planning, managing your investments, organizing your tax strategy, cleaning up your books, or just deciding what to pay yourself… the point is this:
You don’t have to do all of it yourself.
A good professional doesn’t take control away from you. They give you back your time so you can live the life you actually built the business to support.
That’s the whole point, right?
To maximize your life in the ways that matter most.
Whatever that means to you.
Jose Alvarez
Founding Advisor
Harvest Horizon Wealth Strategies Me
The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. Images included in this blog are created by artificial intelligence. Any resemblance to any existing persons, past or present, is purely coincidental. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.
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