EP 88: Stop Underpaying Yourself: The Hidden Cost Every Entrepreneur Must Face

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Written By Kerri Roberts

Episode Description:

Too many business owners are grinding for years without truly paying themselves what they’re worth. Loyalty doesn’t mean self-sacrifice - and underpaying yourself is silently wrecking your finances, your business, and your culture. 

In this episode, Kerri Roberts pulls back the curtain on what happens when leaders don’t prioritize their own paycheck, why it’s dangerous, and how to start fixing it - before burnout, resentment, and financial stress take over. 

This is your wake-up call: if your paycheck doesn’t reflect your contribution, it’s time to pivot. 

Tune in to hear: 

  1. The Truth Behind Entrepreneur Paychecks - Learn why 26% of small business owners don’t pay themselves at all (OnPay, 2023). 

  1. Ripple Effects You Can’t Ignore  - How underpaying yourself impacts not just you, but your team and your company culture. 

  1. Data That Shocks  - Federal Reserve findings on financial instability and what they mean for entrepreneurs like you. 

  1. Real-Life Stories - Kerri shares her own journey of working for less than corporate pay—and how she made the shift. 

  1. Action Steps That Work - Practical strategies to audit, prioritize, and scale your compensation without tanking your business. 

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Full Transcript:

Kerri Roberts (00:17)

Hey there, welcome back to another episode of Don't Waste the Chaos. Today we're talking about something I see in so many business owners and leaders, and that is underpaying yourself. Now, if you're listening to this episode and you're like, hold up, the executives in my company or the business owner in my company is making bank. I get it, that is happening. But when we're talking about small to mid-sized businesses, that is not always the case. And so I'm talking to the folks.

who this actually applies to, out of loyalty to your business or to your people or to the mission, you keep sacrificing your own paycheck. But loyalty doesn't mean self-sacrifice. So I want to talk about when you consistently underpay yourself, how you're not only undervaluing your worth, you're also setting a precedent for your team and your business culture. You know who you are.

you are not paying yourself enough or you're not charging enough. And this is something that I see frequently. So if this doesn't apply to you, tune out. But I would say this is happening more often than most individuals realize, especially if it's in a founder situation where they're trying to lift the company up, but they're not paying themselves. So today we are going to get into it. This is important. If your team looked at your pay stub right now.

what story would it tell them about how you value your own contribution? And I would say, I've been guilty of this as well. I started my firm two and a half years ago and wasn't paying myself at all the first year and then paid myself a chunk of change at the end of the year, but ⁓ I'm not even 10 % of what I had made the year prior working in corporate, so not even close. And then year two.

started paying myself a salary and it's a salary lower than what I've gotten paid in 10 years. But as a business owner, you do have other benefits, right? And so there's a balance, but it still matters. And I know there's ways to maneuver things for tax reasons and I get that and I do that as well. But we're talking about overall what you're getting from your business. And not too terribly long ago, my husband looked at me and said, how long are you going to keep working for free? And I'm not working for free.

but it's a lot less than what I used to make when I worked in corporate. And so I heard his question and I started to make some pivots and I let that hold me accountable and so my hope is that this episode will hold you accountable and don't let me come across as tone deaf. If you're like, Kerri I don't have the money in my business because I didn't go out and get funding, I get that. How long is the question? How long are you going to run like this before you change things?

Why do leaders or owners underpay themselves? Here are some of the common reasons. The fear of cashflow instability, a belief that everyone else gets paid first, guilt tied to the mission or to loyalty, running your business like it's a passion project, hoping that someday the business is gonna pay you back. In 2023, I saw, or I see the survey from 2023, it's from OnPay. 26 % of small business owners don't.

pay themselves at all. And among those who do, the median salary is around 68K. That's well below the average corporate executive pay. Again, this was the small business finance report that came out from On Pay in 2023. Undervaluing yourself creates hidden costs like burnout, resentment, and personal financial stress. So let's get into it as far as why we're going to tackle this today, why it matters, and what you're going to do. So there's a ripple effect of underpaying yourself.

There's the personal impact first. Of course, there's debt, limited retirement savings, strained family life. The Federal Reserve reports that 37 % of adults can't afford a $400 emergency expense without borrowing. And I know that's a fact. My husband is a mortgage broker and he's constantly analyzing financial data and credit reports. And what he sees is kind of mind blowing. Essentially what he's seen is

what he says is that people are financing fast food. And I know you're like, no, they're not, but here's the deal. They are because if a ton of what's coming across in your credit card statement is food related, and then you're making minimum payments, then you are literally financing your fast food. And fast food's freaking expensive. I was at Chick-fil-A last week. I spent 60 bucks on me, my husband, and my son. Now they're big boys, but still that's expensive for a fast food meal. And

If I would have put that on my credit card and then not paid that off, then I'm financing it, then it's even more expensive. This is making a huge, huge personal impact on your finances. 37 % of adults can't afford a $400 emergency expense. And that came out from the Federal Reserve and their economic well-being report. So that's the personal impact, but on the business impact, your team models what they see. If you undervalue your work, they may undervalue theirs. One of my team members,

was doing extra work, kind of having to do some things manually and she was doing it when I found it out I was like, hey, let's order you another piece of technology and she was like, no, that's expensive and I realized right then and there, I'm putting out the wrong message. Now I want my team members to understand the impact to the bottom line and I want them to understand the ROI. We talk about top line revenue and all of that. I'm very transparent with them financially but I don't want them.

to feel where they can't get the tools and the resources they need to accomplish their job. At that point, then we're just being ineffective and inefficient and it's not working out. You have the ability to reinvent yourself at any time, but if you aren't paying yourself, you have an inability to reinvent yourself. You've got fewer strategic moves from the business. Like, you're not able to pay yourself, so then you're not going to invest in the tools that you need inside of your business.

you're gonna be less strategic, you're strapping yourself. And when it comes to retention, your absence, if you're burnt out or you need to step away, that costs more than fair compensation would. And so then you're not able to leave the business, then you're not able to take time away, you're not able to balance your life. And what did you start your business for anyway? I heard somebody say at one point, if you started your business, but if you're not paying yourself, you just gave yourself another job and you're just another.

shitty employer that you're working for. And I mean, I hate to say that, but it's true. You want to stay away from this. On the cultural impact, compensation practices signal what's acceptable. If you normalize self-sacrifice, you risk creating a culture of martyrdom instead of a culture of sustainability. I don't think any of us want that in our business, but if we aren't doing it, then our employees aren't going to do it. And I...

one of the compliments that I got from one of my team members one time, she posted on social media, it was like her sitting poolside watching her kids in the summer and she was like, I love that I work for a company where my boss models this behavior and I don't have to feel bad about taking a break and being a mom during the day and that blessed me so big to know that my team sees me, know, posting in the sauna in the morning and when I'm out and about or when I'm taking my walk midday or I eat my lunch outside and...

Even though I don't explicitly say to them, I want you to do these things, modeling that behavior helps them to know there's nothing to hide, like you should live your life. I want you to be a mom, I want you to be a wife, and then this work is not urgent or emergent. It's not a fire. We need to strategically plan so we can live our lives and have balance. And I want my culture to be that way. So we've got personal impact, business impact, and culture impact.

if you're not paying yourself. And when it comes to the loyalty piece, let's reframe the loyalty piece. If you're doing it because you're tied to the mission or you're tied to some kind of loyalty, loyalty is not about ignoring your own needs. If you're a leader, and I've been a leader in an organization before that grossly underpaid me, and I kept thinking that when we do X, Y, and Z, they will make it right. And do you know what happened?

We ended up selling a portion of the business and I helped them get to a place where their business was very desirable. It was not sellable when I arrived. Not because the business wasn't profitable, but because the way things were set up. The way pay was working without getting too far into it. The business was not set up well foundationally. And because of the work that I did,

and that I pushed, we got the business to a sellable point and then we ended up selling a portion of the business and it was very profitable and people made bank. And I found myself sitting at a table getting ready to be what I thought was going to be blessed by this because I had been underpaid when I came on board. They said that I was going to have this base pay and then I was going to have money attached to incentive pay based on.

revenue, well when I got in I realized that they were in the red. Again, not because it wasn't a profitable business, but because the way that the money was allocated, there was no money for me. So I had this disgusting base pay, and I mean lower than I had made in a decade, and this business had told me, you're gonna make more money than you've ever made in your life. And my base pay was a joke, and there was no way for me to make more money if it was attached to the bottom line. So I was incentivized to start pushing. But when you do that to a person, sometimes if they're not a high integrity person like myself,

then they're going to start driving things in the wrong direction and hurt the business because of it. And so eventually I was like, hey, I need to renegotiate my base pay because of the way this is, you all have me set up to fail. And then let's work together on getting this set up in a different way so then we can all win. So then when it was time for all of us to win, I got this little, little bitty piece of the pie and I get it. I didn't start the business. It wasn't built on my shoulders. It had been around for a lot of years before I got there, but.

I was the transitional point. I was the catalyst and there was this very modest amount that was shared with me. And you know what I realized? I had loyalty to people who were not loyal to me. And my mindset started to shift and it started to hit bitterness. Loyalty is not about ignoring your own needs. Healthy loyalty means building something sustainable for you and your people. You can't serve from an empty cup, we've all heard that, but.

So many of us are trying to pour from an empty cup and our cup has got freaking holes and cracks in it. It's pouring out the bottom and we can't get for our people what we are not getting for ourselves. And I've had leaders say, okay, I don't want to demote this person. They're not performing, but I don't want to demote them. So I'll give them some of my pay. Shut your mouth. Like they're not performing. Or I want to give this person a raise. I'll take some of out of my pay. Well, why were we paying you that in the first place then?

If you're willing to take some out of your pay, like aren't you worth what you're making? I see so many people make these odd decisions in business and you know what? I'm judging their decisions, but I've made my own. We need to reframe what loyalty looks like inside of a business and then the ripple effects of that loyalty. So let's talk about some practical steps for business owners. If you find yourself in this seat, you need to audit your compensation. Know what you're paying yourself versus what the market would.

And if you've ever thought in your business, I should quit this business and just go back into the workplace because I'd make more money, that is your sign. That's your sign right here and now. Now, if you're like, but I get all of this flexibility and I have better work-life balance and my taxes look better and all of that, okay, then you're good. But if it's really true that your life would be better in general if you went back to a corporate structure where you are making

so much less of an impact but making more money and have more balance, you need to do something about it. You need to audit that compensation. You need to prioritize owner pay in the budget. I'm not saying year one, day one, but pretty quickly after that, you need to treat it as a non-negotiable, like payroll tax or like rent. You can't not pay your taxes, right? You're scared of that. The government, the boogeyman's gonna come get you if you don't pay your taxes. You're gonna get audited and they're gonna find a whole lot more than the fact that you weren't paying your taxes.

So you need to look at owner pay or high level leadership pay the same way that you would look at payroll tax. Set milestones. If cash flow is tight, set a clear timeline for increasing your pay and tie it to revenue thresholds, which is what I have done. When I hit this, I'm gonna pay myself this. When I hit this, I'm gonna pay myself this. So there's a path and there's motivators for me and there's drivers. You also need to communicate boundaries. Let your team know that you're valuing yourself and that creates space for them to value.

themselves and I've made mistakes in the past of you know saying like this is important to me because I want to get to a place where can pay myself that's not my team's business I shouldn't share that with my team you as a leader you hold that line you don't share that with your team that's your own fault or issue but we don't share that with our team and if you're sharing that with your team then your team's gonna think well she's gonna be shortchanging me too or he's gonna be shortchanging me too because he's not even prioritizing himself

Communicate boundaries. Let your team know that you value yourself and that creates space for them to value themselves. Do not expect these same behavior out of them. Business owners who compensate themselves fairly are two and a half times more likely to report profitability than those who don't. I saw that in a report from the Small Business Administration. It was their performance study. Let me say it again, business owners...

that compensate themselves fairly are two and a half times more likely to report profitability. So let that data point drive you. If you're listening and you realize you don't have systems in place to pay yourself consistently or manage compensation for your team, that's exactly what we built in our program, HR in a Box. It's a 12-month program where we give small business owners the tools.

the templates and the structure to make HR easy and sustainable. So if you're interested in that, I'd love to talk to you about that. And every single Monday, we send out short practical newsletter. It's free to help leaders like you operate more efficiently while prioritizing their people because we are PeopleOps. If you're not on that list yet, I'd love for you to join us. Go to saltlinenvisors.com forward slash contact and we'll get you on that list. Listen, I want you to hear me. I know that...

Money doesn't grow on trees and it's not just sitting around, but as long as we accept behavior toward ourselves where we're not valuing ourselves, it's gonna perpetuate. We're never going to get there. So we do have to pay ourselves and prioritize ourselves. Underpaying yourself comes with personal, business, and cultural cost. Loyalty to the business doesn't mean self-sacrifice, and paying yourself fairly is an act of leadership. It sets the standard for your team. So start by asking yourself,

What would it look like to pay myself in a way that matches the worth I'm bringing to this business? You're bringing worth to this business. You're working hard. Are you working on the right things? I don't know. Only you can assess that. But you're working hard. You're trying to lift this thing up. You need to pay yourself. I know that business ownership can feel like chaos and the money part can be scary, but working on this is worth it. So don't waste the chaos. Embrace it. Until next time.

Kerri Roberts https://saltandlightadvisors.com
Next

Episode 87: Solo Cups, Secrets & Silence: The Real Risk of Hiding Money in Business