How Much Should You Actually Be Paying Yourself as a Business Owner?

by Sean Foster | September 30, 2025  | Business Coaching

“After coaching dozens of business owners, I can tell you the topic of pay comes up often. Many founders keep putting themselves last, but that never works long term. Others often have versions of: “My accountant said: If you’re not paying yourself at least $130K, you're just creating a job, why would you even get out of bed?”

How Much Should NZ Business Owners Pay Themselves?

One of the trickiest questions business owners face is this: how much should I actually pay myself? Pay yourself too little, and you risk personal financial stress. Pay yourself too much, and your business cash flow may suffer. Finding the right balance is key, not just for your lifestyle, but for the health of your business.

1. Why Business Owner Pay Matters

Business owner pay issues fall into two categories:

1. They fall into the trap of reinvesting everything back into the business. While reinvestment is important, not paying yourself can create hidden risks. It undervalues your time and effort, creates unnecessary stress at home, and blurs the line between personal and business finances. In addition, it creates a false sense of how well the business is really performing.
2. Others tend to over-pay themselves. This is acceptable as long as the business can really afford to do so, but again provides a confusing picture on how the business is really performing. And if you have any intentions of leading a more open-book policy in your business, then your overpay will lead to animosity.

Staff usually ask for direction because they’re unclear on what matters most. If every task feels urgent, they won’t know how to prioritise. Without clear priorities, even good employees default to checking in constantly.

2. Salary, Drawings, and Dividends: NZ Owner Pay Explained

• Fixed Salary: Provides stability and predictable income. Common for businesses where owners are also employees.
  Drawings: This is where personal income comes directly from simply taking money out of the business, often just when you need it. Relying on a strong book keeper is critical in monitoring these amounts.
• Dividends: Here the business owner (shareholders) pay themselves from profits after tax. This is business performance based so in some ways is less risky. Often used for shareholders who are not drawing a regular salary from the business.
• Hybrid Approach: Many NZ business owners use a mix, balancing a modest salary with additional drawings or dividends when cash flow allows.

3. How to Benchmark NZ Business Owner Salary

1. Business Cash Flow: Can your business sustain regular payments without putting pressure on operations?
2. Industry Standards: Benchmark against average salaries in your sector. i.e. if you were to employ someone to replace you, what is the realistic salary you would pay to this person considering your experience and skill level.

Now there are other aspects to consider, but I separate these as they are simply less important than the first two.

• Personal Financial Needs: There is no denying that you need money to survive, but for business health you should ensure that you get the business performance to the level it needs to be to fund your personal requirements. Don’t put the cart before the horse.
• Growth Goals: Reinvesting profits is crucial, but so is rewarding yourself fairly for the risks you take. Make sure you get the balance right here.
• Reserve Capital Funds: The majority of businesses do not create a reserve capital fund, and they should be. If you withdraw the majority of your potential dividends, it becomes extremely difficult to create the required reserve funds.

Related to all of these points is understanding your sustainable growth rate and its impact on what you can pay yourself. Expanding too fast without sustainable planning can quickly eat into available cash. Our article Why Understanding Your Business’s Sustainable Growth Rate Matters explains how measuring growth correctly ensures you don’t jeopardise both your pay and your business stability.

4. Common NZ Salary Mistakes for Business Owners

• Underpaying or Not paying themselves at all: Leads to burnout and poor separation between business and personal life.
  And in your accounting programme, you can run a simple P&L report. If you have underpaid yourself, the profits will appear better than they really are. Ensure that you keep some management accounts that accurately reflect your underpayment so that you get a more accurate picture on the performance of the business.
• Paying too much too soon: What you believe you should be paid, and what the business can afford to pay you, needs to be clearly demarcated. You should avoid leaving the business strapped for cash, especially in early growth stages.
• Ignoring tax obligations: Failing to structure payments correctly can result in unexpected tax bills.This problem can be espe/cially acute in the first years of a startup where tax obligations and provisional tax amounts are not catered for.

For more on how money flows through your business, see our article SMEs Simple Guide to Cash Flow 101.

5. Practical Salary Strategies for NZ Founders

A simple framework is the 50/30/20 rule adapted for business owners:

• 50% of profits go back into the business for expenses and growth.
• 30% is set aside for tax and compliance.
• 20% is available for owner’s pay and dividends.

This isn’t one-size-fits-all, but it helps you think about balancing business sustainability with personal reward.
To understand this balance more clearly, it’s important to know how profit is really calculated. Many owners confuse net profit with what’s truly available for them to take home. Our article Net Profit – It isn’t what you think it is breaks down how profit should be viewed and what it actually means for your pay as an owner.

6. How Business Coaching Helps You Better Manage Owner Salary

Working out what to pay yourself isn’t just about numbers, it’s about strategy. A business coach can help you:

• Analyse cash flow and profit trends.
• Set realistic pay that aligns with your goals.
• Build a long-term plan for sustainable growth while supporting your lifestyle.

Our article Can a Business Coach Help Me Fix the Cash Flow Problems of My Business? also shows how poor cash management can undermine both your pay and your business stability.

7. Business Coaching and Cash Flow Management

Business coaching is not only about leadership and growth, it plays a critical role in financial clarity too. External guidance can help you spot hidden cash flow leaks, build forecasting systems, and ensure that your salary decisions align with long-term sustainability.

According to a feature by the Harvard Business Review, leaders who work with coaches often gain sharper financial insight and better resource allocation, leading to stronger business outcomes (Harvard Business Review).

Conclusion & Call to Action

Paying yourself as a business owner is about balancing your own work while protecting your business. Get it right, and you’ll build both financial security at home and strength in your business.

Ready to work out the right balance for you? Book a call with Sean and start making confident financial decisions for your business.

Frequently Asked Questions

Should I pay myself a salary or drawings?
It depends on your business structure. Sole traders often use drawings, while company directors may take a salary and/or dividends.

How do I know if I’m paying myself too much?
If your withdrawals create cash flow strain or limit reinvestment, you may be overpaying yourself.

Can I change how I pay myself over time?
Yes. Many business owners start with modest pay and adjust as the business stabilises and grows.

Can business coaching help with financial decisions like this?
Yes. Coaching helps you align pay decisions with strategy, cash flow, and long-term goals.