How Much Do Small Business Owners Make? | Surprising Averages
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How Much Do Small Business Owners Make?

Running a small business takes passion, gumption, and determination. Becoming a small business owner isn’t a fast track to getting rich. In fact, one report found that only one percent of all small business owners have an adjusted gross income over one million dollars. So, how much do small business owners make?

How much does a small business owner make a year?

Incomes vary because of factors like industry, geographic location, and experience. Being a small business owner is no different. There is no way to predict your personal income because there is no standard small business owner wage.

You might be wondering, how much does the average business owner make? According to PayScale’s 2017 data, the average small business owner income is $73,000 per year. But, total earnings can range from $30,000 – $182,000 per year.

PayScale’s average varies greatly from a slightly older median reported by the Small Business Administration (2015). According to the SBA, the median income for self-employed individuals at an incorporated business was $49,804 and $22,424 for unincorporated firms.

Looking at a nationwide average can be misleading since each state (and even city) has a different cost of living. For clarification, the SBA also breaks down the average income of a business owner by state. For example, their data shows that California small business owners (incorporated) earned $56,142 while Vermont small business owners (incorporated) earned $45,828. For a full list of Small Business Profiles by state, check out the SBA’s website.

How Much Do Small Business Owners Make?

Your small business owner income isn’t in black and white. Take a look at the factors that affect your income.

Industry

Your income might depend on what industry your small business is in. Some occupations and industries pay more than others. To help determine how much small business owners make, take a look at other business owners in your niche. Don’t look at business owners in different industries and expect your income to match.

For example, computer and mathematical occupations earn an annual income of $67,970 while floral designers earn $27,610 per year on average. For more wage information by industry and occupation, visit the Bureau of Labor Statistics website.

Locality

As the SBA reported, your income can vary based on where your business is located. Some areas have a higher cost of living than others. And, there is more demand for certain products and services in some areas than others.

The BLS put together their State Occupational Employment and Wage Estimates guide that breaks down wage information by industry, occupation, and state. You can use this resource to compare wages for different jobs. Because city size correlates to prices, you might make more in some areas than others.

Profits

Depending on whether you receive an owner’s draw vs. salary from your business, your income can change. A draw is a portion of your business’s profits while a salary is a fixed amount you pay yourself on a regular basis.

Unless you receive a salary, your income depends on your profits. If your business’s profits are low, you might take home less of a paycheck than when profits are high. When you are just starting out, your business might not even earn a profit until at least after year one. In this case, you might decide to take home only as much money as you need to cover your expenses.

Instead of cutting yourself a big check, consider whether it will affect your business’s health or not. You might choose to invest money back into your business instead of taking it as income.

According to the SBA, most small business owners limit their salaries to 50% of their profits. That means if your business earns $100,000, your income should not exceed $50,000. For some business owners, the higher your company’s profits, the higher your personal income.

Use resources to determine small business owner income

Although you might be eager to answer, how much do small business owners make?, there isn’t one definite answer. If you are thinking about starting a business, use resources to help you make educated guesses on how much you will earn. But remember, no two businesses are the same.

Your income might depend on additional factors like the amount of marketing you do, customer service, and more.

If you are a veteran small business owner who’s trying to figure out whether you should be earning more or less, you could talk with an accountant to go over your financial numbers. They can help you budget expenses.

Tracking your business’s profits doesn’t have to be difficult. Use Patriot’s online accounting software to record expenses and income. We offer free, U.S.-based support. Try it for free today!

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