What is the Average Income of Small Business Owners?

If you’re dreaming of escaping the corporate rat race to be your own boss, you’re not alone. In 2018, the US Small Business Administration reported that there were 30.2 million small business owners in the United States, and that number grows every year. So why are so many people starting small businesses? And, if you do start your own business, how much can you expect to make?

What is the average small business revenue?

Of course, the revenue your small business earns directly affects how much you can pay yourself. Most small businesses really are small. They’re home-based, don’t have employees and bring in an average annual revenue of $44,000 with two-thirds earning less than $25,000. But when you start adding employees, that revenue number increases significantly. Even with just one to four employees, the average annual revenue climbs to $387,000. And at five to nine employees, revenue averages more than a million dollars.

How much do small business owners really make?

Aside from the annual revenue of the business, there are other factors that contribute to how much small business owners can pay themselves each year. Size is a big one, but other factors that impact the average small business income and business owner salary are industry, gender, geographic location, type of business and length of time in business.


Because a small business is defined by the US government as any business with fewer than 500 employees, average revenue varies widely. A construction company with 499 employees may bring in many millions of dollars while a web designer with no employees probably has an average annual revenue of a few hundred thousand dollars.


With owners being able to control pricing, you wouldn’t think the wage gap—where women earn 79 cents for every $1 earned by men—affects small businesses, but it does! A study conducted by Freshbooks in 2018 concluded that male small business owners generally earn 28% more than female small business owners. Considering that many women leave traditional jobs to start their own business precisely because of the wage gap and lack of advancement opportunity, this statistic is even more discouraging.

Geographic location

According to Payscale.com, the average small business owner in the US makes $66,177 a year. But don’t be concerned if you live in a high-cost city, the average is just that: an average. For example, the average salary for a small business owner in Los Angeles is $85,000, but that number drops to $65,000 when you set up shop in Wichita, Kansas.

Type of business

According to 2016 SBA data, in an incorporated business, owners made above $50,000 while those who were just self-employed made close to $23,000. This makes sense since most small freelancers in the US would not need to incorporate until the business grows beyond what they can service themselves. Incorporation is the result of a revenue increase, not the cause!

Length of time in business

The longer you’re in business, the greater your skills and reputation. As you gain experience and collect positive customer reviews, more clients are referred to you. When you’re well-established you have more business, and you can charge more. So make sure you’re updating your prices each year to reflect your true value!

3 easy steps to increasing your income

To grow your profits, and pay yourself more, you have to increase what you charge and decrease what you spend. Sounds simple, right? But many small businesses have trouble competing, against both big businesses and other small businesses. As a result, you start offering more and charging less—exactly the opposite of what you need to do to improve your income!

We’ve put together three steps you can take to increase profits and cut down extra expenses.

Step #1: Know your reputation and look for ways to improve

There’s a direct correlation between the reputation your business has and your average annual revenue. Improve your brand awareness and reputation by managing your online reputation. Always respond to customer feedback, regardless of whether it’s good or bad. Create a plan to respond to customer issues with your product or service so you are able to solve problems quickly.

You may feel shy, but always ask customers to leave a review. Social proof is the currency of the future, but you have to actively build a positive reputation. Customer reviews won’t just help you improve your brand reputation, those reviews boost your SEO and help you rank higher in search engine results.

And don’t miss the opportunity to get your business in front of folks on social media! Social media is one of the most important and useful ways of spreading the word about your business.

Step #2: Talk to your employees

If you have employees, they’re your direct connection to your customers. They also experience the strengths and weaknesses within your business every day. So ask them to share their observations and ideas about how and what you can do to improve the business. You may discover new creative ideas for marketing your products or services or improvements you would have never thought of.

Step #3: Cut down expenses

You should always know how much your revenue is versus your profit. If you don’t know what you’re spending, you’re probably wasting money. So run accounting reports regularly—especially the profit and loss report. 

And at least once a quarter, complete an audit of your expenses to confirm you’re spending only what you need to. You may find you’re still paying for a service you no longer need or that there’s an annual plan available that costs 20% less than paying monthly. Just as with personal finance, every little bit helps to increase profit and your take home salary!

The average income of a small business owner is affected by several factors. But the good news is you can control most of those factors and increase your salary with just a few easy steps!