How much does the average small business owner make?

Small business ownership can be rewarding and offers a sense of pride for running a successful company. While the average small business owner makes a sizable salary, many owners won’t initially pay themselves a salary when they start the business.

It’s also common for business owners to invest in the business with personal money. According to the Federal Reserve Banks’ 2023 Report on Nonemployer Firms, 76 percent of nonemployer startups use personal funds to finance their business. While the ultimate goal is to pay yourself a desirable salary, you want to play it smart and invest in the success of your business through hard work, financing and careful startup business planning.

Let’s review the average salaries that small business owners make and how to grow your business’s revenue.

What is an average small business owner salary?

The average small business owner’s salary in the U.S. stands at $99,979, according to ZipRecruiter’s average salary data by state. The typical salary range for a small business owner is between $83,178 to $126,515.

By comparison, the average wage index for Americans overall is about $63,795, according to 2022 data from the National Average Wage Index. That average is $36,184 less than the average small business owner salary.

However, what you make as a small business owner depends on various factors, like the industry you’re in. For example, if you start an administrative assistant business, you can expect to make much less. According to the U.S. Bureau of Labor Statistics, the median annual salary for an administrative assistant is $44,080, though this probably spans both small business owners and employees.

Highest-earning states for small business owners

While location may play a role for the highest-earning small business owners, the states where small business owners make the most might surprise you.

Here are the top five states where small business owners make the most:

Source: ZipRecruiter

Lowest-earning states for small business owners

The lowest-earning states for small business owners make around $30,000 to $40,000 less per year than the highest-earning states. Here are the states with the lowest average small business owner salaries in the U.S.:

Source: ZipRecruiter

How much should you pay yourself as a business owner?

There’s no one-size-fits-all answer to how much you should pay yourself as a business owner. Since many business owners bootstrap their businesses to start a company, they’re already pulling from personal savings or borrowing money to get the business going. To that end, many small business owners choose not to pay themselves a salary until the business starts turning a profit.

If you’re in the stage where you can take a salary from your business, you can research the average salary for your industry and your role, such as CEO, with sites like Payscale.

To calculate your small business owner salary, you can:

1. Total all your business expenses, including fixed and variable costs and debt repayments.
2. Subtract all expenses from your revenue.
3. Set aside money for taxes, such as the self-employment tax.
4. See how much profit you have left after expenses.
5. Pay yourself a set salary or withdraw funds as profits allow you to pay yourself.

List of profitable small business ideas

As long as you have a market for your business product or service, you can be profitable with your business idea. You will need to have the proper marketing and skills to create a quality product.

Jumpstart your entrepreneurship with one of these highly profitable businesses:

• Professional services like graphic design, marketing, research or consulting
• Real estate
• Retail
• Personal financial services
• Commercial lending
• Wealth and asset management
• Insurance
• Transportation, like semi truck driving
• Warehousing and public storage
• Leisure like sports and fitness, arts or cooking
• Hospitality, such as restaurants, tour guides or hotels
• Education services, such as tutoring or online education
• Private healthcare practice, like mental healthcare consulting
• Manufacturing, such as shipbuilding
• Agriculture, forestry or marine businesses

Factors that affect your business revenue

The success of your business — and how much you can pay yourself — depends on various factors that drive competitiveness and revenue. Those factors include:

• Industry: To ensure that your business will have high revenue growth, you want to choose an industry that allows that scalability. For example, you may choose a business that doesn’t involve creating physical products so that you don’t have the overhead of the manufacturing or production process.
• Quality of products: Customers will expect your product to meet or exceed their expectations. You’ll want to spend time in market research to understand what customers are looking for in your product or service. That way, you can deliver the best product and customer experience.
• Experience in the market: Depending on the product or service you provide, customers may consider how much experience you have in the industry. For example, Fortune 500 companies may prefer a seasoned business consultant, while local businesses might be willing to hire a new consultant.
• Competition: You want to consider how much competition you have in your industry and the specific business idea you have. Many successful companies enter a saturated field with a new spin on a business that gives them a competitive edge.

How to boost business revenue and growth

Here’s how to grow your business revenue to help your business become sustainable and successful.

1. Do a cash flow analysis to evaluate costs

The first step to growing business revenue is assessing the expenses and revenue you already have, called a cash flow analysis. Take a hard look at your business budget to see your costs and any cuts you can make. You can also use past revenue and growth to forecast how much revenue you might bring in the near future.

2. Consider additional sources of revenue

Once you have a basic understanding of your business’s expenses, you can brainstorm to find new sources of revenue. Think about the products and services you already offer. You can also think about the sales funnel and whether the customer has to buy other products before using your product.

Could you offer a related product or service to help the customer? Becoming a one-stop shop dedicated to convenience is one strategy for diversifying your revenue streams.

3. Create an online store or website to display your services

According to the U.S. Census Bureau’s Annual Retail Trade Survey, online retail sales jumped by over 40 percent during the pandemic compared to previous years.

Many customers enjoy the convenience of online shopping since they can compare prices from multiple stores. They can also get products shipped directly to their homes instead of spending time shopping in a physical store.

To compete, you can create an online store, which reduces the amount of staff hours needed to sell products and helps you sell to a wider audience.

If you’re not in retail, you could create a website to help customers find you and discover what your business is about. Some website platforms like Squarespace and Wix offer low-cost hosting or free website hosting. These platforms are known for their drag-and-drop website-building experience, helping more people get their websites up and running quickly.

Just keep in mind that these websites may not be optimized for search engines. You may want to do your own research to use the right words and search engine optimization (SEO) strategies to get your website seen.

4. Start social media marketing

Customers love connecting with their favorite businesses online. Many customers will even be inspired to buy based on social media posts and influencers. According to Bankrate’s social media shopping survey, a hefty 48 percent of social media users have impulsively purchased products they saw on social media.

But be careful to deliver a quality product and experience. About 57 percent of social media users said they regretted their social media impulse buys.

5. Take digital payments

Consider how your customers prefer to pay you and adopt the technology necessary to meet their expectations. Adopting popular payment options like digital payments can encourage customers to buy from you.

According to McKinsey & Company’s Digital Payments Consumer Survey, 73 percent of customers have shopped online in the past 12 months, and 58 percent made in-app purchases. Another 25 percent have used digital payments like mobile wallets in stores.

Bottom line

Small business owners face the challenge of running their business successfully while still taking enough of a salary to make it worth the hard work. Different business owners have different strategies to pay themselves. Ultimately, though, every business will need to take a hard look at expenses and taxes to determine how much it can afford to pay the owner.

Frequently asked questions

• What is the average net worth of a small business owner?

  The median net worth of self-employed families was $380,000 in 2019, according to JP Morgan Chase & Co. The average net worth of a family of wage earners is around $90,000. It’s important to note that the liquid wealth of future small business owners is 40 percent higher than the the typical wage earner before even starting the business.

• Is it worth it to be a small business owner?

  Being a small business owner has its pros and cons. You get the opportunity to work for yourself, have flexible work hours and do work that you’re passionate about. But, owning a small business can mean that you work long hours initially, and you have to be savvy about finding ways to weather seasonal ups and downs.

• How many hours does the average small business owner work?

  The number of hours that small business owners work can depend a lot on the type of business and the business owner’s capacity. According to a 2013 survey by The Alternative Board, 30 percent of small business owners work 50 to 59 hours and 33 percent work 40 to 49 hours per week. According to Patriot Software, some well-known business owners like Grant Cardone have worked 70 to 95 hours per week to make their businesses successful.