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Profit & Owner Pay Relationship - The goal of any business owner should be to
make money. Yes, you might have various other reasons for starting your business, but ultimately if you
don’t make money (in the form of profit and the salary you pay yourself) then it is unlikely you will fulfil
what you want to achieve for you and your family.

When looking at profit and owner’s pay it is important to distinguish between the two:

• Owner’s Pay is the compensation received for doing the work your business does to generate
the revenue. The skills, the expertise, and the hours put in your products/services to clients. This
is the working ‘in’ your business.

• Profit is the reward for running a successful business. It’s for being the brains behind the
business and for taking the risk. The ideas, the strategy, the setup, the systems, the processes,
the training. This is the working ‘on’ your business.

As your business grows the aim is to work less ‘in’ the business, and more ‘on’ the business. As a result,
the way in which you are financially rewarded will also change through an increase in profit payments
and a decrease in the wage component.

COMBINED PROFIT & OWNER'S PAY ALLOCATION OVER TIME

60%

50%
PERCENTAGE ALLOCATION 30%
40%

20%

10%

0%
ACTUAL Q1 Q2 Q3 Q4
Profit Allocation Cumulative 0% 1% 2% 3% 5%
Owner's Pay Allocation Cumulative 57% 57% 57% 57% 55%

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