Decide the smallest monthly amount you can live on, make sure the company holds a cash reserve before your pay goes above that, then pay yourself a fixed amount on the same day every month. Your legal structure decides how the money moves (a draw, a salary or a dividend). It does not decide how much, and most of the damage founders do to themselves is in the "how much".
Here is that order worked through for one founder, Lena, who runs a small SaaS company and later raises a round.
Step 1: find your floor
Lena adds up what her life costs each month: rent, food, insurance, transport, loan repayments, a small amount of saving. It comes to €3,100 after tax.
The company has to pay out more than that for her to take home €3,100, because tax and contributions sit on top. How much more depends on the country and on whether she is on payroll or drawing profit. Her accountant puts it at €4,300 a month. That €4,300 is her floor, and it is the number that goes in the company's plans.
Paying yourself less than the floor moves the shortfall onto your credit card or onto a partner, and it comes back later as stress or as a side job.
Step 2: fill the reserve before you raise your pay
Lena's company brings in €22,000 a month and spends €13,500 before paying her. It has €30,000 in the bank.
She wants a reserve of three months of costs, including her own floor: 3 × (€13,500 + €4,300) = €53,400. Three months is a planning choice. For context, the JPMorgan Chase Institute found that the median small business in its data held enough cash to cover 27 days of typical outflows (JPMorgan Chase Institute, Cash Flows, Balances, and Buffer Days). A business at that level turns every slow month into an owner's pay cut.
Lena is €23,400 short. Spread over six months, that is €3,900 a month going into the reserve.
Step 3: pay the rest as a fixed amount
The monthly surplus is €22,000 − €13,500 = €8,500. After €3,900 to the reserve, €4,600 is left. That covers her €4,300 floor, so she sets her pay at €4,300 and lets the extra €300 go to the reserve as well.
owner pay = monthly surplus - reserve top-up
= 8,500 - 3,900
= 4,600 available, 4,300 taken (the floor)
After six months the reserve is full, and her pay can rise toward the whole surplus, less whatever the tax bill needs. She reviews the amount twice a year and leaves it alone in between, however good the bank balance looks. A fixed amount on a fixed day is the part people skip, and it is what keeps business and personal money separate enough to read. The pay yourself calculator runs this same order with your own profit, costs and cash.
How the money moves in your structure
The mechanism depends on the legal form of the business. This table covers the common ones; it is a planning summary, not tax advice.
| Structure | How you are paid | What to know |
|---|---|---|
| US sole proprietor or single-member LLC | Owner's draw, a transfer from the business account | You are taxed on profit whether you draw it or not. Self-employment tax is 15.3% (IRS), plus income tax, so set part of each month aside. |
| US S corporation | Salary through payroll, then distributions | The corporation must pay you reasonable compensation for your work before non-wage distributions (IRS). A tiny salary with large distributions is what this rule targets. |
| UK limited company | Salary through PAYE, dividends on top | The company must register as an employer to pay you a salary. Dividends can only come from available profits, need a directors' meeting and a voucher, and money taken out that is neither counts as a directors' loan (GOV.UK). |
Most other countries' limited companies (a GmbH, an SAS, a BV) work like the UK row: the company employs you and pays a salary through payroll, and profit distributions come later. Two questions are worth paying an accountant for: where "reasonable compensation" sits for your role if you run an S corporation, and the salary and dividend split if you run a limited company. Both change the tax bill, in either direction.
If you run a funded startup
A year later Lena raises €600,000 and hires. Monthly costs other than her pay rise to €38,000 against the same €22,000 of revenue, so the company burns €16,000 a month before she pays herself. Here is what her pay does to runway:
| Lena's pay | Net burn | Runway on €600,000 |
|---|---|---|
| €0 | €16,000 | 37.5 months |
| €4,300 (her floor) | €20,300 | 29.6 months |
| €9,000 (roughly what she was offered elsewhere) | €25,000 | 24.0 months |
The €0 row is the one founders are tempted by, because it looks committed and keeps the runway long. It has two problems.
The burn is understated. The company only runs because someone works full time for free. Anyone who looks at the numbers, including you in a year, needs the real cost of running the company, and that includes the founder. Record the floor as a cost even in a month when you defer it.
Her personal runway is much shorter than the company's. At €0 she needs €3,100 a month from savings. With €25,000 saved, she has about eight months. The company has 37 months of cash and its founder has eight, and when the eight run out she starts consulting on the side or leaves in the year it might have worked.
The middle row is the usual answer: pay the floor while the company is pre-revenue or early, and move toward market pay as it de-risks. Agree the number with your cofounder once, write it down, and revisit it at each funding round. How much runway to raise covers the other side of this, sizing the round so it can pay the team you actually plan to have.
In Plainhub your own pay goes on the People page like anyone else's, so it sits in team cost and burn, and the runway you see already includes it.