Deciding how much to pay yourself as an entrepreneur is a genuinely important decision that affects both personal financial stability and the business’s own financial health, and working it out properly means balancing actual personal living costs against what the business can genuinely sustain.
These are the steps to working out a genuine, sustainable salary.
Start from your genuine personal living costs
Calculating the actual minimum amount needed to cover housing, food, transport and other essential personal expenses gives a realistic floor for what a salary needs to cover, rather than an arbitrary or aspirational figure.
This genuine baseline matters even if the business initially can’t afford to pay it in full, since it clarifies exactly what gap still needs to be closed.
Understand what the business can genuinely sustain
A salary that the business can’t reliably sustain month to month creates cash flow strain that ultimately threatens the business itself; understanding genuine, realistic cash flow before setting a fixed salary avoids this trap.
Our guide to improving business cash flow covers building this realistic financial picture properly before committing to a fixed personal draw.
Separate personal and business finances properly
Paying yourself a defined, regular salary rather than drawing money informally and inconsistently from the business makes both personal budgeting and business financial management considerably clearer and more disciplined.
This separation also matters for accurate tax reporting and for presenting credible financial records if the business later seeks funding.
Review and adjust the salary as the business genuinely grows
A personal salary shouldn’t be set once and forgotten; reviewing it periodically against the business’s actual, current financial performance keeps it realistic rather than either underpaying the owner or straining the business.
The South African Revenue Service requires this personal salary to be properly declared and taxed, which is worth structuring correctly from the start rather than adjusting retroactively.
Frequently asked questions
How should an entrepreneur start working out their own salary?
By calculating actual minimum personal living costs first, to establish a realistic floor rather than an arbitrary figure.
What happens if a business pays a salary it can’t sustain?
It creates cash flow strain that can ultimately threaten the business itself.
Should personal and business finances be kept separate?
Yes, paying a defined regular salary rather than drawing informally makes both budgeting and business management considerably clearer.
Does a personal salary affect the ability to raise funding later?
Yes, clear, disciplined financial separation helps present credible financial records to funders.
Should a personal salary be reviewed over time?
Yes, periodically, against the business’s actual current financial performance, rather than being set once and forgotten.
Further reading
Originally published in 2024. Updated September 2026 into a general, principle-based guide to setting a personal salary, reframed from a single expert’s quoted advice.
