Last Updated on May 27, 2026 by
Most Founders underpay themselves for years, then overcorrect at exactly the wrong moment. Both mistakes are costly. One drains the Founder. The other drains the business.
Getting your own salary right is one of the most consequential financial decisions you will make as a business owner. Too little and you burn out. Too much and you starve the business of the capital it needs to grow. Neither extreme ends well.
This guide walks through a practical framework for how much to pay yourself at each stage of your business, along with the governance rules that keep you out of trouble with the ATO.
The Founder Salary Problem
When SBO was founded, the Co-Founders drew no salary for the first 14 months. Not a dollar. Like most early-stage Founders, every available dollar went back into the business.
That financial pressure is real and familiar to most people reading this. The anxiety of watching personal savings shrink while a business slowly finds its footing is one of the defining experiences of early-stage entrepreneurship.
But the opposite mistake is just as dangerous. Walking through the financials of high-growth businesses, a recurring pattern appears: Founders who start rewarding themselves too generously the moment revenue starts moving in the right direction, before the business can genuinely support it.
The question of how much to pay yourself is not really about what you deserve. It is about what the business can afford, and at what stage.
Three Stages of Business, Three Salary Frameworks
PHASE 1 Startup
You are getting the business off the ground. Revenue is unpredictable. Every dollar needs to work hard. At this stage, most Founders cannot afford to pay themselves much, if anything at all.
The Minimum Viable Lifestyle
The most useful concept for startup-phase Founders is what we call the Minimum Viable Lifestyle, or MVL.
The idea draws on the startup concept of a Minimum Viable Product: build the smallest thing that still delivers real value. Applied to personal finances, it means designing your lifestyle around the lowest monthly spend that still gives you a satisfactory quality of life.
Practically, the MVL process involves:
- Auditing every personal monthly expense
- Eliminating anything that is not genuinely adding to your quality of life
- Arriving at a clear, honest number: the minimum salary you can live on comfortably
That number becomes your target salary in the startup phase. It gives you a fixed monthly draw that covers your life without bleeding the business. It also creates discipline. Rather than dipping into the business account when you feel like it, you have a clear structure to work within.
PHASE 2 Scale-Up
Your sales cycle is becoming more predictable. Revenue is growing. You are starting to generate profit. This is where many Founders make the mistake of rewarding themselves too early or too aggressively.
In the scale-up phase, cash flow often looks better on the surface than it actually is. Profit is not the same as cash. Businesses in this stage are frequently investing heavily in headcount, inventory and infrastructure. The working capital cycle, the time between spending money and collecting it back from customers, can create real cash gaps even when the profit and loss looks healthy.
In 2026, with interest rates remaining higher than pre-2022 levels and lenders applying stricter scrutiny to cash flow forecasting, growing businesses need more liquidity buffer than they did a few years ago. This is not the time to pull extra capital out of the business.
A modest salary increase in this phase is reasonable. But it should be informed by a clear view of your cash position, your working capital cycle and a financial forecast that shows the business can support it.
PHASE 3 Maturity
Revenue and expenses are predictable. Growth has stabilised. The business is consistently profitable. This is where paying yourself a proper market-rate salary becomes appropriate.
At this stage, your salary should reflect what you would cost the business to replace you. For private business CEOs in Australia, market CEO compensation in 2026 typically ranges from $180,000 to $320,000 per annum, depending on industry, company size and complexity of the role.
If you are below that range and the business can support it, you are likely undervaluing your contribution. If you are above it and the business is straining, that is a problem worth addressing now.
The Risk of Taking Too Much Too Soon
One of the most consistent patterns in struggling small businesses is Founders who draw ahead of the business. The tell-tale signs: cash flow tightens unexpectedly, growth investment gets delayed, the business starts relying on overdraft facilities to cover operational costs.
The social media image of the young CEO in a Range Rover outside a waterfront home obscures an uncomfortable truth. Behind a lot of those images is a business that is one bad debtor or one slow month away from serious financial trouble. The lifestyle is often debt-financed, not profit-funded.
The key distinction to internalise is that you have two roles in your business: you are both an employee and an investor. Your salary compensates you for the work you do. Your dividends and equity growth reward you for the risk you took. Conflating the two leads to over-drawing as an employee while starving the investor returns.
Governance: Your Company Account is not a Personal Slush Fund
This is worth stating clearly. The only cash you should be drawing from your business is your monthly salary. Full stop.
Dipping into the company account for personal expenses is not just bad financial hygiene. It creates tax complications, distorts your understanding of actual business profitability and sets up habits that become very hard to break as the business scales.
If you want to take surplus profit out of the business, speak to your accountant about the correct structure. This usually comes in the form of a formally declared dividend. It requires a proper process and the right governance. It is not the same as transferring funds to your personal account when you feel like a new car.
A Note on Tax and Salary Structuring in 2026
Many Founders structure their drawings around marginal tax rate thresholds rather than actual market value. Following the Stage 3 tax cuts that took effect on 1 July 2024, the Australian personal income tax brackets have shifted.
It is common for advisers to recommend keeping salary at a level that sits below a threshold, with additional cash needs treated as director drawings or loans. This can be a legitimate tax planning approach, but it carries a risk: it distorts your view of actual business profitability.
If your drawings are being capitalised on the balance sheet rather than expensed through the profit and loss, your reported profit will look higher than it really is. That creates a false sense of financial health that can lead to poor decisions.
A practical fix is to record your drawings consistently through the profit and loss as distributions, even if the tax treatment differs. This keeps your view of profitability honest and makes it much easier to assess whether the business can actually support your lifestyle.
Frequently Asked Questions
👉 Not sure what your business can actually support? Get a straight answer. We will review your current salary structure, your cash position and tell you exactly what is sustainable at this stage of your business.
