Set owner pay as a fixed draw based on your trailing six-month average net income, not on whatever is left in the account on the 30th.
Most owners we onboard are paying themselves one of two ways: whatever is left over at the end of the month, or a number they picked two years ago and never revisited. Both cause the same problem — in a good month you overdraw the business, and in a slow month you quietly stop paying yourself at all.
Start from net income, not revenue
Revenue is not yours. The number that matters is net income after every real cost, including the ones that do not hit monthly: insurance renewals, equipment replacement, your own payroll taxes.
Pull the last six months of net income and take the average. That average is the pool owner pay comes out of — not the balance in the operating account, which is holding money that already belongs to vendors and the IRS.
Take a fixed draw
Pick a number you can pay yourself in your worst of those six months and set it as a fixed draw on the same date every month. A fixed draw does two useful things:
- It makes owner pay a real, visible cost in your P&L instead of a plug
- It stops the slow-month habit of silently skipping yourself
If the fixed number feels uncomfortably low, that is information. It usually means pricing, not spending, is the thing to fix.
Handle the good months separately
Distribute surplus quarterly, not monthly, and only after setting aside tax. Quarterly forces you to look at a full season before deciding the surplus is real — a strong April often just means March's work got invoiced late.
| Account | What it holds | When you touch it |
|---|---|---|
| Operating | Working capital and payables | Continuously |
| Tax | Set-aside, percentage of net | Quarterly, to the IRS |
| Owner | Fixed draw plus surplus | Monthly draw, quarterly distribution |
The goal is not to maximize what you take out this month. It is to make what you take out predictable enough that you stop thinking about it.
What to do this week
- Pull six months of net income
- Set a fixed draw at or below your worst month
- Open a separate account for tax set-aside if you do not have one
If your books are not current enough to pull six real months, that is the first job — see getting current when you are behind.