How much do small business owners make?
Table of Contents
Whether you’re looking to earn a big salary or just be comfortable each month after your bills are taken care of, you’re in business to make money. So, is starting a business worth it?
In this article, we’ll discuss how much small business owners make, along with ways you can increase your business’ profits and the various other sources of value that running your own business can provide you. Discover:
- How much do small business owners make?
- How these figures may be inaccurate
- How these figures change in real terms
- Different types of income small business owners may have
- What if I make less than this?
- Track your business and personal income with Countingup
How much do small business owners make?
With 6 million UK small businesses turning over more than 2.2 trillion pounds as of 2020, there’s certainly lots of money going around, but that doesn’t mean that everyone earns the same. Earnings for small business owners are highly variable, meaning that different sources will show different figures for different reasons. We’ve collated some publicly available figures to give you an idea of what to expect below.
Data from Glassdoor suggests that small business owners make around £30–£40 thousand per year, with totals ranging from £20k to £70k per year. These averages are slightly above the UK average of £24k per year, and given the different profit margins of different industries, it’s understandable that there is a gap of around ten thousand pounds between these measurements.
Similarly, figures from Payscale indicate that small business owners earn around £30 thousand per year, with totals ranging from £17k to £90k per year. Though this is still above the UK national average, there is also an even wider range of salaries from this source.
Finally, Indeed shows an average business owner salary of £34 thousand per year, which sits somewhere in between our first estimate from Glassdoor.
How these figures may be inaccurate
The figures from the previously mentioned websites aren’t perfect measurements of income as they typically assume two things:
- Small business owner income is from full-time work
- Small businesses have the profits and growth history to support these salaries in the first place.
For this reason, small business owner incomes will be much more variable: with some individuals earning tens of thousands of pounds and others earning perhaps a few hundred pounds.
Factors affecting small business owner income will include:
- The age of the business: newer businesses will have less of a sales history to support significant owner incomes. In order to achieve this development level, many businesses focus heavily on growth early on.
- The profitability of their industry or product category: Some industries are more profitable and experience more investment and growth than others. Learn whether your business sits within a high growth industry here.
- The success of their business strategy and advertising: owner salaries need to have the sales to support them. Even if a business is relatively established, small business owners’ incomes may dip over periods if they decide to invest more of their profits into growth and development.
How these figures change in real terms
You’ve probably heard of ‘real’ pay, but do you know how this impacts your income?
Real pay is a measurement of how far your money goes to buy goods and services that you need and want. In particular, two small business owners being paid the same amount in raw terms (for example, £35k/year) will use that money very differently in Cardiff versus Cambridge due to cost of living adjustments.
On this basis, even if you’re paying yourself a lower figure, you may find you can still stretch this to buy more in real terms.
Different types of income small business owners may have
If you’re a company director, you may be able to pay yourself in dividends and salary income. There are different tax rates applied to each, and so, you’ll need to manage your payments well to maximise your personal income.
Learn more about achieving this in our article How much dividend can I pay myself tax-free as a business owner?
What if I make less than this?
It’s important to remember that your personal income doesn’t completely define your business’ success. Not only can you take steps to improve it, but you also benefit from controlling your own working arrangements and conditions.
Learn more about building your business and entrepreneurship in our articles:
- How to grow a small business
- How to budget money for your growing business
- Can you learn entrepreneurship?
- How to Market Your Small Business Effectively: 9 Top Tips
Track your business and personal income with Countingup
If you’re testing ways to grow your business and personal income, you’ll need an accurate and effective system. Gain the business insight and productivity you need, and join the thousands of their UK business owners using the Countingup app to save time on their financial admin and focus on growing their business.
Countingup is the business current account and accounting software in one app. It offers you a dedicated business current account to handle all your financial needs and can automate your time-consuming bookkeeping admin.
With automatic expense categorisation, receipt capture tools and cash flow insights, you can confidently keep on top of your business finances and save yourself hours of accounting admin, even while on the go. Find out more here and sign up for free today.
