How I pay myself a salary from my business

And the things I'm doing wrong according to "official" advice

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One of the things that puzzled me most as I started and then grew my business is how to pay myself from my business. For the longest time, especially as I wasn’t yet relying financially on my business, I’d simply have all business money come into my account and stay there. It was “nice to have”-money, not “needing to have”-money.

As my business has grown and I’ve begun to rely on it more financially, I’ve had to figure out a different strategy for myself. In this post, I share how I went about figuring out how to pay myself from my business and how I’m paying myself a salary now (what has gone wrong along the way too).

I’d love to hear your experiences as well: are you paying yourself consistently from your business, or not (yet)? Do you pay yourself a salary, or do you pay yourself based on what comes in every month?

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How I paid myself in earlier stages of my business

Initially, there was not a lot of money coming in to my business. Or, for many months, no money at all. I’d pay expenses from my part-time teaching job and the couple of times I did in-person workshops was just really pleased to break even on renting the space and printing materials. Any other money that came in was a bonus: my part-time teaching job was paying all the bills, so any additional money that came in was nice to have. The only thing I did do was set aside 40% of all my business earnings for taxes.

At the end of every month I’d sit down with my accounts and move whatever was left over from that month (sometimes quite a bit, sometimes nothing) into my savings. This is the main way that I built my freedom fund—the business buffer that I’ve created to tide me over in slower months now that I’m relying more on my business financially.

Paying myself a salary

In early 2023 I set myself quite specific goals for my business—the first time that I set business goals that were actually based on something and that made sense to me. My goal is to decrease my hours at my part-time teaching job by September 1st 2024.

By May 31st 2024 I want to be on track to reach an annual goal that is enough to make up for the hours I’ll be decreasing. In that sense, setting these financial goals is also a test of my business: it’s not just about making a certain amount of money in general, but figuring out whether my business is capable of carrying this extra financial pressure.

Earlier this year a friend recommended Profit First. She runs a small business similar to mine and said that it had revolutionised how she approaches money in her business. Even though the title creeped me out a bit, I read it and really enjoyed it. In the book, Mike Michalowicz sets out a system of five envelopes into which you direct any of the money that you earn: income; profit; owner’s compensation; taxes and expenses. The idea is that you allocate percentages to each and that of all the money you earn, percentages are moved into the various envelopes.

I can imagine why it has been so revolutionary to so many people: using this system you’ll have no more surprises come tax-time, you’ll always have money for expenses and to pay yourself. By setting aside 40% of everything I earned for taxes I was already using part of this system.

Setting a salary is also a test of whether my business can carry more financial pressure.

For a month or two I experimented with the entire system. I soon ran into some issues, mainly specific to my situation. The main issue is that my bank charges me for every single transaction on my business bank account, which includes transferring money from my business account to my personal account, or even from my business checking account to a business savings account. The whole percentage thing also started to get to me and I landed on a simplified system that works for me.

In terms of income, there is a huge difference between what I made in my business in 2022 and what I made in 2023. Much of that is down to having clinical depression for much of 2022 and not being able to do much. When I implemented Profit First my salary ended up being something like €6 a month, because the system sets your salary based on your lowest-earning months over the previous year.

As I saw my income grow in the spring of 2023 I took a leap and started paying myself a salary per month that was based on the bigger goal that I’ve set myself. I divided this bigger goal into smaller progress goals and in the spring of 2023, as I hit one of those progress goals, I started paying myself. When I scaled back my hours a little bit in September 2023 I increased my salary to make up for the 1/2 day a week that I’m working less at my teaching job. And it’s working.

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My current system

The biggest factor in starting to pay myself a regular salary is that in the Spring of 2023 I realised that I actually could. With “paying a salary” I mean transferring a set amount of money each month from my business income into my personal checking account. Earlier, I wasn’t so much paying myself a salary as simply spending (or saving) whatever came it, whether it was €0, €50 or €200 a month.

The second big factor in all of this is that I finally opened a business checking account. I didn’t have one, but when I started earning more money through my business doing my personal finances became pretty complicated pretty quickly. Now all the money that comes in is no longer automatically in my personal account, so if I want to benefit from it (and buy books, for instance, or, more boring, pay bills) I need to transfer it to my personal account.

My current system

All money comes into my business account. At the end of the month I move 40% of my income into my dedicated savings account for taxes. Of the remainder, I’ve begun to save 5% in a business savings account. Whatever is left after that is moved to another savings account, called “business income”. The salary that I pay myself is automatically taken out of that account every month.

Since my last update about my new 4-month group programme Marketing without social media, I’ve published the full sales page on my website.

I also created a blog banner about the group programme that I added to all of my previous blog posts on social media.

And I’ve been writing answers to frequently asked questions about the programme and adding them to my site. These are the top ones (and let me know if you have any other questions, I’m happy to answer them).

Frequently Asked Questions about the group programme

Who is this mini-course for?

This programme is for small business owners, freelancers and creatives at any stage of their business who want to discover and implement marketing without social media.

I need accountability to stick with courses and programmes. Will you hold me accountable and how?

There’s a couple of ways in which I’ve built accountability in to this programme. Before we start I’ll ask you to fill in a brief questionnaire about your business and your marketing challenges. We’ll be able to refer back to this in the weekly check-ins in our gentle community on Podia, where every Monday I’ll ask you to share what you’ll be working on over the week, and every Friday will ask you how you got on. The monthly office hours also add accountability as I’ll be encouraging you to ask questions–and to share afterwards how you’re going to continue with the answers you received.

What if I’m still on social media and don’t necessarily want to leave? If I want to stay on social media but want to learn more about marketing without it, can I still join?

Yes, absolutely! There is no need for you to leave social media completely—just wanting to spend less time on it, use it differently and explore other ways of marketing is enough reason to join the programme.

What I’m doing wrong

I don’t have an accountant and do my own admin and taxes. While I’m planning on seeing an accountant early next year before I decrease further in my teaching job, I’m fine with no having an accountant or bookkeeper right now. That does mean that there are certain things that I’m not doing the way they should be done, “officially”. The first: expenses.

One of the golden rules of running a business is that your business needs to be able to pay all of your expenses. Which if, like me, you started out with 0 business income but not-0 business expenses is tricky. From the start of my business I’ve always paid my business expenses from my personal account and essentially from my teaching-income. I have always kept track of business expenses in my spreadsheet, but other than that, strictly speaking my business is not paying for my business expenses.

I’m at a place in my business currently that my business absolutely can pay for my business expenses. And now that I have a business checking account, all expenses are paid through that. But I transfer the little lump sum of money for those expenses from my personal account into my business account every month.

The reason for this? I just couldn’t, and can’t, wrap my head around separating this. Or rather, I can, but spending the energy and brain power on doing it the official way is just not worth it to me. And, importantly, I am not two people, one of whom works part-time in teaching and the other runs her own business. In the end, all of this money is my money. This is especially the case since for tax purposes I only do my taxes once a year since my business as yet falls under a certain tax threshold. When I do my taxes, I do them for all of my income at the same time.

The second thing I’m doing wrong, or rather did wrong, is also related to expenses. September 2023 was the best month I ever had in my business. I made more money that month than I made all year in 2022. Hurrah! But when it came time to transfer money to my income-account, I didn’t the money left in my business checking-account that I expected to be there. In other words, I wasn’t able to transfer the money to my “business income”-pot that I wanted to (although I was still able to pay myself my salary).

My first response was to blame myself and tell myself that apparently I wasn’t responsible or good enough with money (old stories die hard). My second response was to check what was happening. It turned out that my expenses this past year had increased, but the money that I put into my account in order to cover those expenses hadn’t. Small mistake easily made. I made a note of this in my spreadsheet, upped the money I’m transferring for expenses and moved on. This is learning.

There is a whole emotional layer to starting to pay myself a salary as well. It means that I now count on earning a certain amount of money—perhaps not monthly, but at least quarterly or annually so that it evens out. This is scary and for me brought up a lot of feelings. I’ve written more about how I deal with money in my business, including the emotional side, here.

Take a moment to think or journal about these questions:

1. How are you currently paying yourself from your business, if at all?

2. To what extent are you ready to set yourself a salary each month? What do you need in order to do this?

3. What can you do to make your business more financially viable? Remember, you’re not doing anything wrong if your business isn’t there yet.

I’d love to hear your experiences as well: are you paying yourself consistently from your business, or not (yet)? Do you pay yourself a salary, or do you pay yourself based on what comes in every month? There is no doing this “wrong”—wherever you are, you’re in the right place, doing the right thing.

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a book | I’m a sucker for historical literary fiction and The House of Doors by Tan Twang Eng didn’t disappoint. It’s a beautiful atmospheric tale of love and life that kept me wanting to go back to it again and again (affiliate link).

another book | I picked up Nathan Hill’s Wellness on a whim, thinking it’d be a palate cleanser in between other books. But it really surprised me: it’s sprawling and big, but so much resonated with me from this novel, from how we form relationships with each other to the role of algorithms and what it means to be successful in life (affiliate link).

a puzzle | with the onset of Autumn I got back into jigsaw puzzles again and treated myself to a stack of new ones. This one is my favourite so far: it’s beautiful, and just the right amount of challenging.

What’s on your lists of favourites this month? What did you read, see, hear, drink, eat, observe that made your day?

• The most annoying business advice I ever received.

• October thread: what do you listen to while working?

• 10 things I learned about growing paid subscriptions on Substack.

• November Accountability Club.

I hope you have plenty of time for rest and recharging as we’re moving into darker days and, for many of you, a busier holiday season ahead. If you feel the need to hibernate, carve out some time for yourself to do so—I know I will. I’ll be back in paid subscribers’ inboxes next week with a behind-the-scenes look at how I tackle big projects in my business, and towards the end of the month with a free post on how I schedule my weeks and months.

Until next time xx

Let’s work together

If you’re craving a slower, gentler and more profitable business, I’d love to support you. Over the past year, I’ve worked with female small business owners, freelancers and artists to restructure their days and week; create big picture plans; launch their Substack; brainstorm and plan new products and more.

Most of all, I help them feel a sense of clarity and empowerment in choosing to do business differently.

Send me a message or check out my website for ways of working together: from one-off sessions to flexible packages. I’d love to be by your side this year.