How Much Should I Pay Myself? Owner Pay Calculator

The business collected $1.8 million last year. You took $6,000 a month, some months less, and the household needs $9,500. Your bookkeeper says the profit was $180,000. Your bank balance says $96,000, and it was $140,000 in March. "How much should I pay myself" is the question, and the answer you keep getting is a salary survey for a job title, or a percentage of revenue somebody read somewhere. Neither is your number. A survey tells you what a job pays; it does not tell you what your business can hand you next month without missing payroll in a slow one.

This page is the owner pay decision from the owner's side of the desk, in two steps that have to run in this order. First, how much cash has to stay in the business, worked out from your own wait to be paid, your own heaviest and weakest months, and the lumps you already know are coming. Then, how much of what the business generates is left for you after the tax it carries and the reserve it still needs. It ends in one of four answers -- raise, hold, cut temporarily with a restoration trigger, or the business cannot yet support the target -- and the free owner pay calculator runs the same math on your numbers with every field blank until you fill it.

The Real Problem: Owners Pay Themselves From the Balance, and Size the Reserve From a Rule

Two mistakes decide most owner pay problems, and they are the same two mistakes facing opposite directions. The first is the draw. An owner looks at the bank balance on the day the mortgage is due, sees $96,000, and takes what the month needs. The balance is not the number that decides it. The balance is the reserve, the cash that keeps payroll and rent moving through the six weeks between finishing a job and getting paid for it, and drawing against it is drawing against the next slow month. The number that decides it is what the business adds in a normal month before it pays you, less what that month's earnings will cost in tax, less what the reserve still needs.

The second mistake is the reserve. Most owners have heard a rule -- three months of expenses, six months, some percentage -- and either hold to it without knowing why or ignore it because it looks impossible. The rule is not the problem; the fact that it is somebody else's rule is. A restaurant that gets paid at the counter and a contractor that waits 45 days on every invoice do not need the same reserve, and neither of them needs a number that came from a survey of businesses that are not theirs. Your reserve is a function of four things you already know: how long you wait to get paid, how big your worst outflow month is, how thin your worst collections month is, and what lumps are due in the next quarter. Those are the inputs. There is no benchmark in the answer.

There are three ways the owner pay question comes out badly, and all three are visible from your own numbers before you decide anything:

• The business generates nothing to pay you from. Collections in a normal month are at or below what the business pays out before you. Every dollar you take comes out of the reserve or the line of credit, and no reserve pace changes that. The fix is upstream: pricing, the cost of the people doing the work, or overhead.
• What is left after tax is less than you need. The business adds cash, but once the tax on it is set aside the number does not reach your household. Raising the draw anyway does not raise the number; it moves the shortfall to April.
• The reserve is not there yet, and building it at the pace you chose leaves nothing. The economics clear once the floor is reached, but six months of contribution eats the whole draw. That is a pace problem, not a business problem, and it has a different answer.

Each one alone is a hold, a cut, or a cannot-yet. None of them needs a salary survey, a rule of months, or a consultant's opinion of what an owner is worth. That is why the reserve question comes before the pay question, and why the pay question comes before the raise.

How Much Should I Pay Myself? The Six Numbers That Decide It

These are the inputs. Pull them from the bank statements, not the invoices, and from your last return, not a rule of thumb. The right-hand column says who in your finance setup can produce each one if you cannot.

Question 3 is the one owners answer with their terms instead of their reality, and question 6 is the one they skip. Net 30 on the invoice and 38 days in the bank are different numbers, and the reserve is built on the second one. The tax percent is not a rate anyone publishes for you; it is what your own return says the business's income cost, and leaving it out makes every pay number on this page a number before tax.

How Much Cash Reserve Should a Small Business Have? The Floor, From Your Own Numbers

The wait to be paid. Average monthly outflows before owner pay, times the days from invoice to deposit, divided by thirty. This is the cash that keeps the bills paid while the work that covers them is still an invoice. A business that pays out $131,000 a month and waits 38 days is carrying $165,933 of its own bills at any moment, and that money is not available for anything else. A counter business with zero days carries none.

The spike cushion. Your heaviest outflow month in the last twelve, less the average. The month three insurance premiums and a quarterly tax payment landed together is going to happen again; the cushion is the difference, not the whole month.

The dip cushion. Your average collections, less your weakest month. The January nobody paid, or the month the big customer's accounts payable went on vacation, will also happen again. The floor carries the gap.

The lumps. What is due in the next ninety days that the monthly average does not already contain. If it is in the average, leave it out; if it is annual, quarterly or one-time, it goes here.

The floor. The four added together, in dollars, and divided by average monthly outflows for the number in months. It is the cash that stays in the business. Below it: build, at a pace you choose, and the monthly contribution comes off the top before anything is paid to you. Within a week of outflows above it: the target is met, and there is nothing to build and nothing worth moving. Further above it: the excess is a one-time distribution if the business is adding cash after paying you at today's level, and it is runway to be held if the balance is falling. Most advice on this question only ever argues for holding more; the floor is also the number that tells you when holding more is just cash the business does not need.

The Math: What the Business Can Pay You

Cash generation before owner pay. Average monthly collections less average monthly outflows, with your own pay taken out of the outflows. This is the whole pool. If it is zero or negative, the rest of the page does not apply yet, and the answer is upstream.

The tax set-aside. Your own percent, from your last return, applied to that generation. Income tax on the business's earnings comes due whether or not you draw them; a draw sized before the set-aside is a draw the business pays for twice. If you are paid by draw and self-employment tax applies to you, it belongs in the same percent. Nobody publishes this rate for you; the return preparer who did last year's return can tell you what it was.

The reserve contribution. If cash is below the floor, the gap divided by the months you chose to build it. This is a temporary charge with a known end date, which is what makes a cut for it a temporary cut with a trigger rather than a permanent one.

Capacity, now and after. Generation less the set-aside less the contribution is what the business can pay you now, while the floor is being built. Generation less the set-aside is what it can pay you once the floor is reached. If you are paid through payroll, the employer's share of Social Security, Medicare and federal unemployment tax on your wage is a cost to the business, so the gross wage is solved to fit inside the amount with those taxes on top; the rates are cited below and the calculator carries them. Capacity is the ceiling. Your need is the target. The verdict is where the two meet.

The verdict. If generation is zero, or capacity after the floor is below your need, or the build pace you chose leaves nothing, the business cannot yet support the target; fix the causes first. If your need fits inside capacity now, raise to it (never above it), or hold if you are already there. If your need fits only after the floor is reached, hold today's pay with the raise trigger written down -- the month cash reaches the floor -- or, if today's pay is above what fits now, cut to what fits with the restoration trigger written down. A cut with a trigger is a plan. A cut without one is the new normal.

Worked example: the $1.8 million electrical contractor who takes $6,000 and needs $9,500

An electrical contractor collecting $150,000 in an average month has been paying the owner $6,000 a month by draw, when the balance allowed it. The household needs $9,500. The bank balance is $96,000 today. Here is the whole decision on those numbers. Every figure is the example's own; the tax percent is what this owner's last return showed, not what yours will.

Notice what decided it. The business generates $19,000 a month before paying the owner, which looks like plenty against a $9,500 need, and the bank balance of $96,000 looks like plenty against a $6,000 draw. Neither number was the answer. The reserve this business actually needs, from its own 38-day wait and its own worst months, is $239,933, and the balance is $143,933 short of it; the tax on the $19,000 takes $4,560 before anyone sees it; and the $7,996 a month that closes the gap over eighteen months leaves $6,444 for the owner. The raise is real, and it is eighteen months away, with a trigger the owner can write on the wall: the month the balance reaches $239,933.

Change one input and the verdict changes. Had the owner chosen to build the reserve in twelve months instead of eighteen, the contribution is $11,994 and capacity now drops to $2,446: cut temporarily to $2,446, restore to $9,500 at the floor, and the calculator names the pace that keeps today's $6,000 -- 17.1 months. Had the balance been $300,000 instead of $96,000, the reserve verdict flips to release: $27,317 above the floor plus a week of outflows is a one-time distribution the business does not need, and with no contribution to carry, capacity is $14,440 now, so the pay verdict is raise to $9,500. Had collections averaged $140,000 instead of $150,000, generation is $9,000, capacity after the floor is $6,840 against a $9,500 need, and the answer is cannot yet support: $2,660 a month short with the reserve fully built, and nothing to do with pay until pricing, labor cost or overhead moves.

What to Do With Each Answer

The calculator returns two verdicts, one for the reserve and one for the pay, and each maps to a next action. None of them is "take what the balance allows."

Where the Numbers Come From, and Which Ones Are Yours

Almost every number in this decision is yours, and that is the point. Two are federal and fixed, and they only enter if you are paid through payroll.

• The reserve floor. Built entirely from your own bank statements, receivables aging and calendar. No months-of-expenses rule, no survey of how much cash other businesses hold, and no published buffer figure appears on this page or in the calculator. The trigger to build, hold or release is your own volatility, your own wait to be paid and your own committed obligations.
• What an owner should earn. Not on this page. Sources that publish one measure a salary for a job title, and they disagree with each other by wide margins; none of them measures what your business can hand you from its own cash. Capacity is the ceiling and your need is the target, and both come from you.
• The tax set-aside. Your own percent from your own return. It is not a statutory rate and no default is offered; blank is treated as zero and the calculator says so, loudly, because a pay figure before tax is a different number from a pay figure after it.
• Employer Social Security and Medicare on an owner's wage. If you are paid through payroll, the business pays 6.2 percent of your wages for Social Security, up to the annual wage base ($184,500 for 2026), and 1.45 percent of all wages for Medicare, with no cap. The 0.9 percent Additional Medicare Tax on wages above $200,000 is withheld from the employee and has no employer match. Source: IRS Tax Topic 751. Cited in the calculator and overridable.
• Federal unemployment (FUTA) on an owner's wage. 6.0 percent of the first $7,000 of wages, less a credit of up to 5.4 percent for paying state unemployment tax on time, so 0.6 percent net, $42 a year at most. Employers in a state that has not repaid its federal unemployment loans lose part of the credit and pay more; the calculator's default is the floor. Source: IRS Tax Topic 759. State unemployment tax on an owner's wage varies by state and is not included; your rate notice has it.
• How you are paid, and what wage is reasonable. Whether an owner should be paid through payroll at all depends on how the business is organized for tax, and what wage counts as reasonable compensation for the work an owner does is a figure the return preparer or an enrolled agent sets with the reasoning documented. Neither is a calculator output. This page takes how you are paid today as a fact you state, and owner draws vs payroll covers who sets the figure and who runs it.

When This Is Not the Right Starting Point

If you cannot produce twelve months of collections and outflows with your own pay separated out, the reserve floor above is a guess and so is everything after it; not trusting your numbers is where to start, and behind on books and almost missed payroll is the version of it where the cash scare already happened. If the profit on the P&L is real but the cash is not there to pay you, the question is not how much but where it went: profitable on paper but the bank account is empty names the three usual causes, and the profitable-but-no-cash pain area routes the fix. If the reason you want a raise is that a hire is on the table and you are weighing the two against each other, run the hire first: can you afford another employee puts the loaded cost of the person against the work, and this page then tells you what is left for you. And if the trigger was a CPA saying "reasonable compensation" or a banker asking for a W-2, that is the mechanism question, not the amount question; owner draws vs payroll is the page for it.

Frequently Asked Questions

Sources

• Internal Revenue Service, Tax Topic 751, Social Security and Medicare Withholding Rates: employer share 6.2 percent and 1.45 percent; 2026 Social Security wage base $184,500; Additional Medicare Tax 0.9 percent is employee-only. Page last reviewed or updated 2026-01-20; read 2026-09-12. Used only where the owner is paid through payroll.
• Internal Revenue Service, Tax Topic 759, Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return: 6.0 percent on the first $7,000 of wages per employee; maximum credit 5.4 percent; net rate after credit 0.6 percent. Page last reviewed or updated 2026-02-25; read 2026-09-12. Used only where the owner is paid through payroll.
• Every other number on this page is either the worked example's own arithmetic or comes from your records. No owner salary, no cash reserve, no buffer-days figure and no tax rate here is a benchmark.

Next Step

If the question in your head is whether you can take more, the first move is the reserve floor and the capacity on your own numbers, before the raise and before the next draw. The owner pay calculator at GetAFractional runs it in about five minutes: the floor in dollars and months from your own wait, spikes, dips and lumps; the build, release or hold verdict; capacity now and once the floor is reached; and the raise, hold, cut-with-trigger or cannot-yet verdict against what you take and what you need, with every field blank until you fill it.

If the answer comes back cannot yet support, the fix is upstream of pay: the profitable-but-out-of-cash diagnostic sorts timing from drains from margin, and if you cannot answer the six questions from your books, who should help with my books names the role that can.

This article is informational and does not constitute financial, legal, or tax advice. Consult a qualified professional for decisions specific to your situation.