How Much Do Small Business Owners Make?

Small business owners

Welcome to an exploration of the fascinating realm of small businesses and the earnings that fuel their dreams. Picture this: a world where corner shops and quirky startups form the backbone of innovation and economic vitality. In this article, we’re embarking on a journey to untangle the web of factors that influence the financial fate of small business owners

As we delve into the topic, Ecwitty unveils the hidden forces that play tug-of-war with small business owners’ earnings, revealing a colorful spectrum of circumstances. So, if you’re budding small business owners seeking insights for your own adventure or just curious about buying a small business, you’re in for tips for small business owners that prove to be successful. 

How Much Does a Small Business Owner Make a Year?

Venturing into the world of small business ownership is like embarking on a fascinating financial journey, where your hard work and dedication steer the course of your earnings. A study by PayScale found that the average small business owner’s salary in the United States is $60,648. The study also found that the range of average income for small business owners is from $29,000 to $127,000.

However, the actual average income of small business owners and their success rate can vary widely depending on several factors:

Financial Goals and Reinvestment

Imagine you’re driving toward a financial destination. Some small business owners are like road-trippers who want to pocket money along the way, ensuring a steady income. On the other hand, there are those who act like travelers investing in their journey, putting profits back into their business to make it bigger and better. This choice affects how much money small business owners take home each year.

Budget planning is essential to create financial goals. A study conducted in 2021 discovered that only 54% of small businesses have engaged in the crucial process of creating an official budget.

Additionally, taking out loans for small business owners helps you meet small business owners’ targets as well. In fact, during 2022, the Small Business Administration (SBA) disbursed $25.7 billion across over 47,000 7(a) small business loans. Among these, 68% constituted loans of $350,000 or lower in value. Moreover, in the year 2022, the typical loans for small business owners averaged a total of $663,000.

Tax Deductions and Planning

Think of taxes as a puzzle. Small business owners find the right pieces to reduce their tax bill. By using tax deductions, they lower the amount they owe the government. It’s like finding discounts that boost the money they get to keep. They can do this by setting up their business in a smart way, keeping track of business expenses, and using special tax breaks.

Market Impact and Customer Demand

Picture a marketplace where customers call the shots. If a business lines up with what people want right now, it’s like catching a wave. When a small business owner offers something that’s super popular, more people buy it, which means more money comes in. Keeping an ear to the ground and changing what the business offers based on what’s hot is like turning up the volume on income.

Median Income

One of the financial mistakes caused by new owners is mistaking the median income as the ‘ideal income.’ According to Fundera, the median annual income for small business owners who are self-employed by their incorporated businesses is $50,347. Those who are self-employed by unincorporated firms made a median income of less than half that, at $23,060. This figure provides a general sense of the income landscape.

Important: While the median income serves as a benchmark, it’s essential to recognize that the small business owners’ income spectrum is vast. Some owners surpass this median, enjoying more substantial earnings, while others might earn below this figure.

How Much Does a Small Business Owner Make a Year?

If you’re wondering how much do business owners make, the average business owner salary is dependent state-wise. (Source: Zip Recruiter)


California is renowned for its diverse and robust economy, making it an attractive destination for aspiring entrepreneurs. The state’s economy is anchored by flourishing sectors such as technology, entertainment, agriculture, and tourism. Silicon Valley, located in the San Francisco Bay Area, is a global hub for innovation and technology startups. 

However, California’s cost of living and doing business is notably high. With this, the average income of a small business owner amounts to $109,437. Despite this, the state offers various tax incentives and opportunities for small businesses, such as tax credits for research and development activities.


Texas boasts a resilient and diversified economy encompassing industries like energy, manufacturing, healthcare, and technology. The state’s business-friendly environment, including its lack of state income tax, draws entrepreneurs seeking favorable tax conditions. Texas is home to major metropolitan areas like Houston, Dallas, and Austin, which foster innovation and entrepreneurial growth, which brings the small business owners’ salary to $90,597.

Additionally, the state has a well-established support system for small businesses, including small business development centers and resources for access to capital. You can get short-term loans featuring an average annual percentage rate (APR) of 400% or commercial loans, with the value of loans extended by U.S. commercial banks surpassing 17.3 trillion U.S. dollars as of June 2023.

New York

New York stands out for its thriving financial sector centered around Wall Street, which offers a plethora of opportunities for finance-related small business owners. The state is also a hub for the media, entertainment, and fashion industries. With a concentration of major corporations and cultural institutions, New York provides an environment rich in potential clients and collaborators. 

However, the cost of living and operating a business in New York City, particularly Manhattan, is notably high. Entrepreneurs in New York benefit from access to a diverse talent pool, networking events, and numerous business accelerators and incubators, which total the salary to $80,884. Therefore, learning about loans becomes crucial in order to succeed for small business owners. Loans such as micro-loans, typically capped at $50,000 in amount, or unsecured business loans, with an average interest rate of 10.93%.

Tip: If you’re having trouble finding how much of a loan amount you need, use a business loan calculator. More than 90% of small enterprises utilize a business loan calculator to assess their monthly obligations and overall interest expenses before seeking a loan.

Tips for Small Business Owners

When making a decision about where to start a business, small business owners should take into account:

  • Industry Focus: Consider the dominant industries and sectors in a particular state. Some states have a more substantial presence in specific industries, providing networking and partnership opportunities within that sector.
  • Experience and Expertise: Entrepreneurs with relevant experience may find it advantageous to be in states with established business communities related to their industry.
  • Financial Considerations: Evaluate the cost of living, taxes, and other economic factors. States with lower prices may offer more favorable conditions for business growth and sustainability.
  • Networking Opportunities: Look for states with a strong network of small business owners, mentors, and potential collaborators. Access to industry events and business associations can be instrumental in business success.
  • Access to Talent: Consider the availability of skilled employees and potential hires. Proximity to universities and research institutions can provide a talent pool for technical and specialized roles.

Factors That Affect Small Business Owners’ Salaries

Industry and Niche

The sector where small business owners find their footing wields a significant influence over the owner’s earnings. The scope for profit margins varies across industries, casting a shadow of potential on the salary spectrum. Thriving fields like technology and healthcare often offer broader financial horizons compared to sectors with narrower profit margins.

Business Size and Revenue

The dimensions of a business, often measured by factors like team size and overall average small business revenue, emerge as paramount in shaping the owner’s earnings. With their robust revenue streams, larger enterprises typically wield the capacity to reward their small business owners with more substantial salaries, echoing the resonance of their business growth.

Geographic Location

The geographic coordinates of a business’s home base stand as a decisive influencer. Each locale boasts its own economic rhythm and living costs, painting a backdrop against which salaries are gauged. Establishing shops in a high-cost urban center may necessitate beefier owner salaries to accommodate personal expenses. In contrast, small business owners in more frugal regions allocate a more modest slice of revenue to wages.

Economic Conditions

The prevailing economic pulse within a geographical pocket casts a direct shadow on business fortunes and, by extension, the proprietor’s earnings. Flourishing economic climates tend to parallel heightened consumer spending and business expansion, creating a fertile ground for bolstered earnings for small business owners.

Business Success and Profitability

A significant 71% of consumers anticipate higher-quality support from small businesses compared to larger corporations. Therefore, managing a small business well is crucial. The triumphs etched into a business’s story directly reverberate onto the owner’s paycheck. 

The symphony of success, composed of healthy profit margins, resonates harmoniously with the proprietor’s financial gains. The upward trajectory of profits fuels business growth and orchestrates a tune of elevated compensation for the visionary behind the enterprise.

Do Businesses Make Profit in the First Year?

Industry Dynamics Matter

The nature of the industry you’re entering can significantly influence small business owners’ profit. Some inherently lend themselves to quicker revenue generation due to lower startup costs or higher demand.

For instance: service-based businesses or online ventures often have fewer initial expenses than companies requiring significant infrastructure or manufacturing setups. Being mindful of these dynamics can help you set realistic expectations for your early financial journey.

Initial Planning and Strategy

Solid planning and a well-crafted strategy play a vital role in achieving profitability early on. Thorough market research, a clearly defined target audience, and a compelling value proposition contribute to a smoother path toward generating revenue. Establishing a well-thought-out business plan that outlines your steps to:

  • Attract customers
  • Manage costs
  • Generate sales 

provides a roadmap for achieving your profit goals.

Financial Prudence and Investment

The availability of financial resources and how you allocate them can significantly impact your profitability timeline. Adequate funding allows you to weather initial challenges and invest in essential areas like marketing, product development, and customer acquisition. Careful financial management and prudent investment choices enable you to optimize your resources and maximize the potential for early profits, aligning the average profit of small business owners.

Responding to Market Demand

Understanding the needs and preferences of your target market is crucial in gaining traction and generating revenue in the first year. Offering products or services that directly address a pressing demand or solve a specific problem can lead to quicker customer adoption. Flexibility to adjust your offerings based on customer feedback and market trends positions you well to capture early sales and drive profitability.

Gradual Growth vs. Immediate Profit

It’s essential to recognize that immediate profitability might not always be the primary goal, primarily if you’re focusing on rapid growth and expansion. Some startups prioritize:

  • Reinvesting early earnings into scaling operations,
  • Acquiring new customers, 
  • Enhancing their product offerings.

While this approach may delay initial profitability, it sets the stage for stronger financial performance in the long run. Balancing the pursuit of growth with the objective of achieving profitability requires careful strategic decision-making.

How Much Does the Average CEO Make?

The average CEO salary of $825,900 is based on a survey of CEOs of publicly traded companies in the United States. The survey was conducted by the executive compensation data firm Equilar.


The earnings of small business owners and CEOs boil down to a mix of factors like the type of business, where it’s located, and how well it does. Small business owners wear two hats, managing money now and planning for business sustainability

CEOs, on the other hand, are like captains steering their big company ships, thinking about company performance and their own pay. Both need to make smart moves to thrive in the ever-changing world of business. Just contact Ecwitty to see a successful business right in front of your eyes.

Frequently Asked Questions

Q1: How Should I Pay Myself as a Business Owner?

Deciding on your pay as a business owner involves thoughtful consideration. One common approach is to set a reasonable salary based on industry standards and your business’s financial health. This ensures you receive consistent compensation. Additionally, consider taking profits as dividends or distributions, which can offer tax advantages. Balancing a steady salary with reinvesting in your business for growth is key.

Q2: What State Pays Business Owners The Most?

The earnings of business owners can differ significantly by state due to factors like living costs and business opportunities. States with vibrant economies, such as California, New York, Texas, and Florida, often offer higher income potential. However, it’s important to weigh this against factors like taxes and expenses when considering your location.

Q3: Can A Business Owner File For Unemployment?

In many cases, business owners aren’t eligible for traditional unemployment benefits since they aren’t employees. However, if you’ve paid unemployment taxes and your business shuts down due to circumstances beyond your control, you might be eligible for a form of unemployment assistance called Pandemic Unemployment Assistance (PUA) or similar programs during exceptional situations, such as the COVID-19 pandemic.

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