SAN FRANCISCO — One in four small-business owners aren’t paying themselves anything at all. Most of the rest are paying themselves well below market rates.
That’s one of the core findings behind a recent SCORE webinar titled “Paying Yourself as a Business Owner: Build a Sustainable Owner’s Salary,” presented by Jessica McKellar, co-founder and CEO of Pilot, a bookkeeping and accounting firm that works with thousands of small businesses nationwide. McKellar works with business owners at every stage, from startups to businesses winding down, and she says owner pay is the second most common topic her firm hears about, after financing.
“Many small businesses are running a nonprofit by accident,” McKellar says.
By the Numbers
McKellar’s team surveyed more than 8,000 small-business owners for Pilot’s 2026 State of Small Business report, and the results back up what shows up daily with clients. Along with the one in four who draw no pay at all, two-thirds of small businesses have less than three months of cash runway, and 55% are still managing their finances by hand rather than with software or professional help. At the same time, 51% expect to double their revenue this year.
“It’s an environment where a business is really cash constrained, but the owners are optimistic about the future of the business,” McKellar says. “To make everything work, to make the numbers work out, a lot of small-business owners are not paying themselves at all, or they’re paying themselves below market rates.”
That combination, McKellar says, is what makes the problem so easy to miss. A business can look and feel like it’s thriving, growing revenue, staying busy, while the owner quietly goes without pay to make the math work. Add in the fact that more than half of owners are managing their own books without help, and it becomes harder to see clearly what’s actually happening month to month, let alone build a case for paying yourself a real salary.
Trap One: Subsidizing the Business
McKellar says she has watched two patterns repeat across the businesses she works with, both of which mask a company’s true financial health. The first is subsidizing the business without acknowledging it.
“Not paying yourself a market-rate salary, covering shortfalls by putting personal cash into the business, eating expenses you never reimburse,” McKellar says. “The business looks healthy because you’re personally absorbing the gap every month.”
A couple hundred dollars moved from a personal account to cover a slow payroll month starts to feel routine, McKellar says, and the business never has to reckon with whether it can actually support itself.
Trap Two: Skipping the Math
The second trap is treating the business’s health as a feeling instead of a number.
“It’s more vibes based,” McKellar says. “It’s like, well, you know, it feels like the store is really busy, it feels like my client roster is filling up, it feels like we’re heading in the right direction. But whether or not a business is financially sustainable, whether you can pay yourself, whether you can afford to make another hire, it’s a math problem at the end of the day. You have to be willing to do the math.”
The same feeling shows up behind any storefront, drycleaning counters included. A full conveyor and a line of customers can look like proof the business is working, without ever answering whether it’s actually profitable.
To illustrate both traps, McKellar described a client she’s worked with for years: a woman who has run a restaurant in the Bay Area for more than five years without ever paying herself. The restaurant is well-reviewed and well-regarded in its community, in part because the owner runs a program offering free or subsidized meals to anyone who needs one. She came to McKellar at the end of 2025 with a clear goal for the new year.
“I love my restaurant. I want to make this work,” the owner told McKellar. “But I can’t keep doing this if I don’t start paying myself, and I don’t know what to do.”
McKellar says the woman had, in effect, been running a nonprofit funded by her own savings for five years, which isn’t sustainable no matter how good the food or how full the dining room.
Fixing it, McKellar says, requires two things.
“The first is you have to understand your actuals,” she says. “You need to get to the point of being able to look at some financial statements and really understand, month over month: Here was my revenue, here were all my costs, and were we actually profitable by the end of the month?” The second is operating from a forecast, using that same accurate financial picture to plan changes rather than guess at them.
Come back Thursday for Part 2 of this series, where we’ll look at what McKellar’s team found when they pulled up the small-business owner’s actual books, and the three-lever framework they used to try to turn the business around.
Have a question or comment? E-mail our editor Dave Davis at [email protected].
