Paying yourself is two separate jobs. The first is putting your wage into your costs: you give every hour you work a value and load it into your products and your overheads, so your prices cover it. The second is taking the money out: a fixed amount, on fixed dates, from a business account kept apart from your own. Whatever is left after paying yourself is the business's profit, and you split that separately at the end of the month.
Wage in the cost vs owner draw
When you work out the cost of your own labour, you are saying what your hour is worth and how many hours each product takes. That goes into the loaded cost, alongside ingredients and packaging. It is a calculation, not a movement of money.
The draw is money that actually moves from the business to you. If the costing is right and your prices cover it, the draw takes care of itself. If not, the draw turns into taking money whenever the household runs short, and you never know whether the business is paying you or you are eating into its working cash.
Step 1. Choose your hourly rate
Pick a number you could defend: what you would pay someone to do what you do, or what you would earn in a similar job. Do not set it low to make your costs look better. All that does is hide the fact that the business is not paying you.
Step 2. Count all your hours
Track one normal week, in two columns:
- Production hours: cooking, baking, packing, labelling, cleaning up.
- Business hours: shopping at the wholesaler, standing at the market, answering orders, deliveries, bookkeeping.
The second column is the one people forget, and in a small business it can be a third of the total.
Step 3. Put your hours where they belong
Production hours go into the cost of each product. If a batch of 12 sourdough loaves takes 2 hands-on hours and your rate is $20 an hour, each loaf carries 2 × 20 ÷ 12 = $3.33 of your labour.
Business hours do not belong to any single product. They are a monthly fixed cost, paid for by the contribution margin of everything you sell.
Step 4. Separate the business money
One account for the business, one for you. Every sale goes into the business account. Every ingredient and packaging purchase comes out of it. Your wage moves from one to the other on a fixed date. Without this, none of the above works. The guide on separating business and personal money covers how to set it up.
Step 5. Pay yourself a fixed amount on fixed dates
The same amount every two weeks or every month. That lets you plan your household and lets the business plan its purchases. If your months vary a lot, set the wage from what a slow month leaves, not a good one.
Step 6. Split what is left
At the end of the month, after your wage, look at the profit. A simple rule: part stays in the business as a buffer and part comes to you as an extra. You choose the split, but choose it before you see the number.
Worked example: a sourdough and granola business
You work 22 hours a week in production and 10 hours on shopping, markets, orders and admin. Your rate is $20 an hour. A month has about 4.3 weeks.
| Item | Sum | Per month |
|---|---|---|
| Production | 22 h × 4.3 = 94.6 h × $20 | $1,892.00 |
| Business | 10 h × 4.3 = 43 h × $20 | $860.00 |
| Total | 137.6 h | $2,752.00 |
The $1,892.00 of production time is already spread across the cost of your loaves and granola. The $860.00 goes in as a fixed cost.
How you pay yourself: $1,376.00 on the 1st and $1,376.00 on the 15th (2,752.00 ÷ 2).
At the end of the month: after paying you, the business made $900 in profit. Your rule is half and half: $450 stays as a buffer and $450 comes to you. That month you received 2,752.00 + 450 = $3,202.00, and the business has $450 more cushion.
When the business cannot pay you yet
Now picture a month in which, before paying you anything, the business leaves only $1,900. You worked the same 137.6 hours. What you really earned per hour was 1,900 ÷ 137.6 = $13.81, not $20.
Do not take the full $2,752.00 anyway. The gap, 2,752.00 − 1,900 = $852.00, would come out of the cash you need for ingredients, and you would start next month tighter. Take what there is and use the number as a diagnosis:
- Do your prices cover the cost with your hour at $20? If not, the problem is price.
- Did you sell less than usual? Then it is volume.
- Is there a product that takes many hours and leaves little? Check what it leaves per kitchen hour.
One month like this is a slow month. Three in a row means the business, as it stands, does not pay for your work, and it is better to know that in numbers. The guide on how to know if your product is profitable walks through the tests, and the last one is exactly this: whether the product makes money after your own pay.
Tax
What you take out may have tax consequences depending on where you are and how the business is set up. Check your local tax rules or ask an accountant.
Do it with the calculator
Enter your hourly rate and the minutes each batch takes in the food cost calculator; your wage goes into the cost of every product and the suggested price already covers it.
Frequently asked questions
What hourly rate should I pay myself?
At least what you would pay someone else to do your work, or what you would earn in a similar job. A very low rate makes your costs look good while the business is not really paying you.
Is my wage the same as the business's profit?
No. Your wage pays for your work and belongs in the cost. Profit is what is left after paying you, and it is what the business earns as a business. Mix them and you cannot tell whether you are making money or just covering your time.
What should I do if a month cannot cover my wage?
Do not take money that is not there, or you will be short for the next batch of ingredients. Take what there is and treat the gap as a signal: check prices, costs and volume before next month.
Do I pay tax on what I take out?
It depends on where you are and how your business is set up. Check your local tax rules or ask an accountant.