Why Paying Yourself First is the Best Business Strategy
Your business is making money, but your personal bank account tells a different story. Sound familiar?
Many small business owners in South Africa prioritise reinvesting every cent back into their business, believing that sacrificing their own salary is a sign of commitment or a necessity for growth. But here’s the reality: not paying yourself is one of the biggest financial mistakes you can make.
If you’re building a sustainable business, your personal financial health needs to be as strong as your company’s balance sheet. Let’s break down why paying yourself first is a business strategy - not an indulgence.
1. Your Business Exists to Serve You, Not the Other Way Around
A business should support the owner, not trap them in a cycle of financial struggle. If your business can’t afford to pay you a basic salary, it’s not truly profitable yet.
Without a steady income, you’ll likely:
? Rely on personal savings to cover living expenses.
? Struggle to build personal wealth outside the business.
? Risk financial stress that affects decision-making.
Paying yourself first forces you to structure a business model that generates sustainable revenue - one that isn’t dependent on you constantly “making sacrifices.”
2. Profit Is Not the Same as Cash Flow
A common mistake business owners make is assuming that profit automatically means available cash. Your financial statements may show a profit, but if your cash flow is tight due to slow-paying clients or high expenses, you’ll find yourself short at the end of the month.
By allocating a salary for yourself as a fixed expense, you ensure that your compensation is factored into cash flow planning - just like any other operational cost.
3. Investors & Lenders Want to See a Sustainable Model
If you plan on scaling your business, securing funding, or bringing on investors, your ability to pay yourself is a key metric of financial stability.
Lenders and investors look for businesses that:
? Have a clear financial structure.
? Operate independently of owner subsidies.
? Generate enough cash flow to cover all necessary costs - including owner compensation.
A business that can’t sustain its founder is not attractive to investors or banks.
4. Paying Yourself Helps You Separate Business & Personal Finances
One of the biggest financial pitfalls for small business owners is mixing personal and business finances. If you don’t have a structured salary, it’s easy to:
?? Withdraw money whenever you need it (which creates messy books).
?? Overspend in your personal life, assuming “business is doing well.”
?? Struggle to track true profitability.
Solution:
This financial discipline ensures your business finances remain clean and transparent, making tax season and compliance with SARS much smoother.
5. How to Structure Your Owner’s Pay
Paying yourself doesn’t mean taking whatever’s left over at the end of the month. A structured salary should be:
?? Realistic – Start with a modest but liveable salary, increasing as your business grows.
?? Consistent – Even in slower months, aim for a steady paycheque to maintain financial stability.
?? Tax-Efficient – Consider a mix of salary and dividends to optimise your tax obligations.
In South Africa, small business owners can also explore:
? Paying a basic salary + performance-based bonuses.
? Retirement contributions (tax-deductible and crucial for long-term wealth).
? Trust structures for tax and succession planning (best discussed with an accountant).
If you’re unsure about how to structure your pay, speak to a professional accountant to ensure you're optimising for sustainability and tax efficiency.
Final Thoughts: You Are Your Business’s Most Valuable Asset
A business that doesn’t pay its owner isn’t thriving - it’s surviving.
If you’re still hesitant to take a salary, ask yourself:
?? Would you work for someone else without getting paid?
?? What happens to your personal finances if the business slows down?
?? Are you building a business that supports your life, or a business that consumes it?
Smart financial planning starts with paying yourself first. Your business should be profitable enough to sustain you AND itself.
Need help structuring your pay and optimising your financial strategy? Book a discovery call with us today, and let’s build a business that works for you.
?? Book a call here: https://maverickaccountants.co.za/discovery-meeting/