How to start paying yourself as a business owner

When Tyler started his recruiting firm, he didn’t intend for it to stay a firm of one. “It was just me, and I had aspirations of it being more than just me,” he says. So in a pattern that will feel familiar to many business owners, he embarked on several years of underpaying himself so he could hire employees and reinvest in growth.

The first year the company did $30,000 in revenue. This past year, they broke $3 million. We asked Tyler, when did you start paying yourself? What did you learn? What tips do you have for others? At the end, he shares his four pieces of advice.

This is part of a series where we ask successful owners and founders about the decision to start paying themselves.

It takes discipline to consistently pay yourself as a business owner

Tyler started his career in investment banking on Wall Street. This seemed like a great place to make money but it was an awful grind. Tyler thought, is my purpose really to make more money for other people? What can I do for myself and my family? So he left his job to start his own real estate trust business. 

The business did not go as he’d hoped.

“It turns out, I was really just not a good investor,” he laughs. So he pivoted to applying what he’d learned in high finance to consult other real estate firms. That did work. He’d help them analyze acquisitions and write offer packages. That was fine. Though he did recognize that he’d basically just built himself a regular old job. One where any time he paused, so did his income.

This is how he had the idea to launch a new offering that’d make Bullpen what it is today: A matching service that connected companies with vetted real estate experts. It’s what Tyler was doing manually for clients, but within a process that employees could help him run. “It was a sort of UpWork model, on a contract basis,” he explains. Clients would receive a small markup on the typical hourly rate for a consultant, and Bullpen would source the talent. 

That model worked. In 2022, when interest rates dropped and fractional hiring fell out of favor, they added full-time hires, and rebalanced their client list. Things were progressing. He had a business.

But along the way, Tyler hadn’t been paying himself. 

“I thought if I held off, it’d get really big,” says Tyler. His wife was employed, they didn’t have kids, and it felt like a risk they could take. “I was fortunate, I was young, we didn’t have obligations, and I could chase a dream,” he recalls. 

But he couldn’t hold off paying himself forever. So as he started hiring more employees, he began asking, how much to pay himself? He talked to a friend in venture capital who thought about salaries in increments of $3,000, and Tyler adopted that. He paid himself just a few times that as an initial salary.

Any money the business made beyond that and regular payroll, he reinvested in learning how to grow the business. Tyler would test running ads or writing a newsletter. He’d try sales or marketing software. He saved up enough of a cash cushion to hire a first salesperson. Then several employees. Then he began to run into serious cash issues. 

“The second you start adding more salaries, the cash issues return,” he says. “Because, you’ll hoard cash so that you can hire. You’ll save up six months of runway. But then you hire, and suddenly your per-month cost goes way up and that runway isn’t six months anymore, it’s three. We’d go from ‘This is awesome and we’re hyper-comfortable’ straight to ‘We’re doing horrible.’”

Going into year three, Tyler thought, “Well I have to start paying myself something more substantial," so he could contribute to the family’s finances. But now he felt trapped. Pulling out more cash would endanger their cash position and slow their growth.

Now he felt trapped. Pulling out more cash would endanger their cash position and slow their growth.

For several years, Tyler let his pay fluctuate with the business. Which meant his pay fluctuated heavily with the commercial real estate market, which fluctuated as often as interest rates. He went from paying himself one-third of a full salary to double that. Then he cut it. Then he raised it. In year five he broke six figures and celebrated. Then the business fell out and he dropped his salary to what it was when he started—even as some of his salespeople’s commission checks soared. 

It all seemed tolerable so long as it felt like he was building toward something. Then he and his wife had a child.

“You think you know something about time constraints, then you have a kid,” he laughs. “Generally, the spouse who earns less will pick up the slack, like childcare, so I was really only working from 8-3 pm. Plus the costs. Medical bills. Devices. Daycare. But you know, that moment was a turning point because it forced me to be a much wiser entrepreneur.” 

“Having a kid was a turning point because it forced me to be a much wiser entrepreneur.”

Tyler started setting himself a fixed recurring salary, because it really was no longer an option. Instead of always flexing to the business, he started to alter the business to conform to what he and his family needed. 

And, he began honestly accounting for his own time. 

“For the first time I had to confront the unit economics of the fact I was discounting all my time as a founder,” he says. “I realized that if I was ever going to truly replace myself, and escape that trap, I’d have to account for how much my time is really worth. If you do that I pretty much guarantee you’ll realize your business’ economics aren’t as good as you thought they were.” 

Constraints led to innovation and a stable paycheck let Tyler focus more on growing the business—perhaps more so than prior, when he had cash but financial stress. Bullpen now employs 13 people. Now Tyler’s wife is about to leave her job and, in a full circle moment, she can take that risk because Bullpen now covers them both. 

Here is the pay wisdom Tyler wants to pass along

If you want to replace yourself, record your time
“If you don’t, you’re contributing these mysterious chunks of 12, 20, 100 hours to projects that on paper look like they’re succeeding. But only because you’re valuing your time at zero. Especially if you own huge, operational processes. Unless you’re going to find an employee who works for zero, value your time now.”

A professional services business generates cash, not equity
In the early days, Tyler underpaid himself thinking he’d build a big business that’d eventually take care of him, because he held all the equity. But he learned professional services is not typically an equity game. “The enterprise value of this type of business is very low. The future cash flow isn’t all that predictable. So the value is generating and keeping actual cash. I’d guess that that’s true for 80% of small businesses,” says Tyler.

Hire revenue-generating employees and client-facing roles first
Salespeople are a good first hire because by definition, they pay for themselves. The more you pay them in commission, the more the business makes. However, be very strict and consistent. Set firm rules and stick to them. If people feel the rules are arbitrary or up for negotiation, you will constantly be negotiating and that’s an unstable foundation for a new business.

Pay yourself enough to solve problems at home
“Get to where you can pay yourself enough to solve any money troubles at home. In the early days you’ll have money stress. But you will begin making wiser, longer-term choices once those are handled.”