Owning a small business usually pays less than having a job
Nearly half of owners never turn a profit, and even a million-dollar business can leave its owner with an ordinary paycheck.
Modern Wisdom · Why Working Harder Won’t Make You Rich - Codie Sanchez - #1145Owning a small business usually pays less than holding a job.
Business buyer and investor Codie Sanchez says 46% of business owners are not profitable. She puts the average owner's pay at somewhere between $40,000 and $60,000 a year.
Of owners whose businesses make money, she says 64% still earn below a full-time California minimum wage, which she puts at about $75,000 to $78,000 a year for full time work.
Scale helps less than people expect. Sanchez says a business that makes $1 million a year is well above the top 1% of businesses, even though the owner may take home only about $150,000.
By her figures, about five million businesses were created last year, the most ever, compared with her rough estimate of roughly 200,000 to 500,000 in 2019. Yet fewer are profitable and owners' wages keep going down, so she says flashy founders are actually poorer than most employees.
Questions people ask
Why do so many business owners earn so little?
Owners often pay staff, rent, suppliers, and debt before they pay themselves, and many keep prices too low to cover the true cost of their own labor. If revenue is lumpy or growth requires reinvestment, the owner absorbs the gap. That is why profit on paper does not always mean a comfortable paycheck.
What is the difference between starting a business and buying one?
Buying an existing business means you get customers, cash flow, and a track record from day one, which lenders and data can evaluate. Starting from scratch means months or years with no sales while you test the idea. Neither guarantees success, but buying skips the riskiest early period.