Owner Compensation Benchmarks 2025
What business owners pay themselves at $1M, $5M, $10M, $25M, and $50M in revenue. Data-driven guidance for setting your compensation.
Key Takeaways
- •Average small business owner compensation: $80,000-$125,000, with wide variance
- •Owner salary typically ranges from 10-30% of revenue at smaller scales, declining as percentage at larger scales
- •30% of small business owners take no salary, reinvesting everything
- •Optimal compensation balances personal needs, business growth, and tax efficiency
"How much should I pay myself?" It's one of the most common questions business owners ask—and one of the hardest to answer. Too little, and you risk burnout and personal financial stress. Too much, and you starve the business of growth capital.
This research compiles benchmark data to help you understand what's typical for owners at your stage. Use it as a reference point, not a prescription—your specific situation matters more than averages.
About This Data
Owner compensation varies enormously based on industry, geography, business model, and personal circumstances. These benchmarks represent typical ranges—your appropriate compensation may be higher or lower.
Owner Compensation Overview
Median Owner Salary
$80,000-$125,000
all small businesses
Top Earners (90th %ile)
$175,000+
salary only
Take No Salary
30%
of small business owners
Owner Compensation by Revenue Stage
As businesses grow, owner compensation typically increases in absolute dollars but decreases as a percentage of revenue:
| Revenue | Typical Owner Salary | % of Revenue | Total Comp (w/ Distributions) |
|---|---|---|---|
| <$500K | $40,000-$75,000 | 10-20% | $50,000-$100,000 |
| $500K-$1M | $60,000-$100,000 | 8-15% | $80,000-$150,000 |
| $1M-$3M | $80,000-$150,000 | 5-10% | $120,000-$250,000 |
| $3M-$5M | $120,000-$200,000 | 3-6% | $175,000-$350,000 |
| $5M-$10M | $150,000-$275,000 | 2-4% | $250,000-$500,000 |
| $10M-$25M | $200,000-$400,000 | 1-3% | $400,000-$1M+ |
| $25M-$50M | $300,000-$600,000 | 1-2% | $500,000-$2M+ |
Profitability Matters More Than Revenue
These figures assume typical profitability (10-20% margins). A $5M business with 30% margins can afford more owner compensation than a $10M business with 5% margins. Always base compensation on sustainable profitability, not revenue.
Owner Compensation by Industry
Industry significantly affects owner compensation due to varying margins, capital requirements, and market rates:
| Industry | Median Owner Salary | Range (25th-75th %ile) |
|---|---|---|
| Professional Services | $125,000 | $85,000-$200,000 |
| Technology / SaaS | $140,000 | $90,000-$225,000 |
| Healthcare Services | $175,000 | $120,000-$300,000 |
| Manufacturing | $110,000 | $75,000-$175,000 |
| Construction | $95,000 | $60,000-$160,000 |
| Retail | $70,000 | $45,000-$120,000 |
| Food Service / Restaurant | $60,000 | $35,000-$100,000 |
Methods for Setting Owner Compensation
There are several approaches to determining appropriate owner compensation:
Market Rate Method
Pay yourself what you'd pay someone else to do your job. Research market salaries for CEO/GM/President roles at companies your size.
Best for: Establishing a defensible base salary
Percentage of Profits Method
Take a percentage of profits (typically 25-40%) after covering all expenses. Aligns your compensation with business performance.
Best for: Variable compensation tied to results
Revenue Percentage Method
Set salary as a percentage of revenue (5-15% typical). Simple to calculate but doesn't account for profitability differences.
Best for: Businesses with consistent margins
Hybrid Method (Recommended)
Reasonable base salary (market rate) plus profit distributions as cash allows. Provides stability while rewarding performance.
Best for: Most businesses—balances security and upside
Factors That Should Influence Your Compensation
Increase Compensation When...
- Business is consistently profitable
- Cash reserves are healthy (3-6 months)
- Growth investments are adequately funded
- Your current pay is below market rate
- You've taken below-market for extended period
Be Conservative When...
- Business is in growth investment phase
- Cash is tight or unpredictable
- Major capital needs are upcoming
- Profitability is inconsistent
- Economic conditions are uncertain
Tax Implications of Owner Compensation
How you structure compensation affects taxes significantly. This overview is educational—consult a tax professional for your situation.
Entity Type Impact
S-Corporation
Must pay "reasonable salary" (subject to employment taxes). Additional profits can be distributed without employment taxes. Balance is key—too low a salary draws IRS scrutiny.
LLC (Taxed as Partnership)
No formal salary requirement. All profits flow through and are subject to self-employment tax up to certain limits. Guaranteed payments are common for working owners.
C-Corporation
Salary is deductible to company but taxed to owner. Dividends are double-taxed (corporate + personal). Compensation planning is critical to avoid excess taxation.
Get Professional Help
Owner compensation strategy intersects with entity structure, tax planning, and business needs. A fractional CFO and CPA working together can optimize your compensation for both business health and tax efficiency.
Common Owner Compensation Mistakes
Taking Too Little
Martyrdom doesn't serve the business. Underpaying yourself causes personal financial stress, masks true business economics, and can lead to burnout. Pay at least 70-80% of market rate.
Taking Too Much
Extracting all profits prevents reinvestment, strains cash during downturns, and can create problems with lenders or investors. Maintain healthy reserves before maximizing distributions.
Ignoring Tax Implications
Taking all compensation as salary (in an S-Corp) or all as distributions can create tax inefficiency. Work with professionals to optimize the mix.
Inconsistent Approach
Varying compensation wildly based on monthly cash makes personal budgeting difficult and can signal poor financial management. Set a consistent base with variable bonuses/distributions.
Frequently Asked Questions
How much should I pay myself as a business owner?
Owner compensation typically ranges from 10-50% of profits, with most falling in the 25-35% range. The right amount depends on your business's cash needs, growth plans, and profitability. A common approach: pay yourself a reasonable salary (what you'd pay someone else to do your job) plus profit distributions as cash allows.
Should I take salary or distributions?
Most owners take a combination. Salary provides consistent income and is tax-deductible for the business (though you pay employment taxes). Distributions come from after-tax profits and may have tax advantages depending on your entity structure. A fractional CFO or tax advisor can help optimize this mix for your situation.
When should I increase my compensation?
Consider increases when: business profitability has improved consistently, cash reserves are healthy, growth investments are funded, and your compensation has fallen behind market rates. Avoid increasing compensation at the expense of necessary business investments or healthy cash reserves.
What if I'm not paying myself enough?
Many owners underpay themselves, especially in growth phases. This can mask true business economics (if you're not paying market rate, profitability is overstated) and cause personal financial stress. Aim for at least 70-80% of market rate for your role, even during growth periods.
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Optimize Your Compensation Strategy
A fractional CFO can help you balance owner compensation with business needs and tax efficiency. Let's discuss your situation.
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