CPA Daniel Honan explains how painting business owners should pay themselves using a framework that targets 15% of revenue as owner discretionary earnings. He breaks down a tax-efficient strategy: a reasonable W-2 salary plus profit distributions that can save $8k-$15k annually, with role-based percentages for sales, production, admin, and executive work. A real example shows how one owner improved gross profit from 38% to 50% by adopting an S-corp structure with a $65k salary.
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If you own a painting business and you're not sure if you're actually getting paid what you're worth, this video is for you. You're taking the risk, you're carrying the payroll, customers, insurance, subs, and all the stress. But are you being paid like a real business owner, or are you just the most overworked employee in your company? In this video, I'm going to show you the exact benchmarks, real math, and a simple owner pay model so you can see in dollars whether you're underpaid or right on target. If you click this video, you're probably asking yourself 3 things. First, At my current revenue level, what should my painting business be paying me? Second, how do I split that between salary, profit, and bonuses without wrecking cash flow or screwing up taxes? And third, how should my pay change as I grow from wearing all the hats to running a real company at $1 million, $2 million, or $3 million plus? In this video, I'm gonna go through and answer all three of these questions with clear benchmarks, real examples, and a simple three-bucket model that you can plug into your own numbers. Hey, I'm Daniel Honan. I'm a CPA and a former painting business owner. I've helped hundreds of painting contractors scale their businesses, and here's what I see over and over again. Most owners never build a compensation model for themselves. They pay everyone else first, then they take whatever's left or nothing, and they have no idea what they should be making. And that's what we're fixing today. And by the way, if you like learning like this, I wrote a book called Profitable Painter that walks through these same frameworks in more detail— budgeting, owner pay, cash flow, pricing, and you can get a copy of it for free. It normally costs $20 on Amazon, but you just got to cover the shipping. There's a link in the description if you want to go deeper. All right, so let's dive into these numbers. Section 1: The Benchmark Most Owners Don't Know. Let's start with the baseline most owners have never heard of. A healthy painting business should produce at least 15% of revenue in owner discretionary earnings. I call this the beach test. You should be able to step away no estimating, no managing jobs, no answering the phone, and still collect a 15% return because the business runs without you. Now, discretionary earnings means the total financial benefit the business provides to the owner, and that includes your salary or wages, your profit distributions, and owner perks paid by the business— things like vehicles, insurance, and benefits. This answers one simple question: what does the business actually produce for the owner? And here's the key idea: if your business can't pay you a fair return unless you're grinding nonstop, you don't own a business, you own a very demanding job. Here's a simple example. If your painting business does $1 million in revenue, you should be targeting at least $150,000 in discretionary earnings, even if you're completely passive in the business. That's the floor, not the ceiling. Section 2: Salary is not owner earnings. This is where a lot of owners get confused. Your owner earnings are not just your salary, especially if your business is taxed as an S corporation, which many painting businesses should be. Here's the mistake I see. Owners run all their pay through payroll because it feels clean. It's not. It's not tax efficient. Here's the plain English strategy. As an S corp owner, the goal is this. You pay yourself a reasonable W-2 salary for the work that you actually do. Then you take the rest as profit distributions, which are not subject to self-employment tax. At my CPA firm, we run reasonable officer compensation studies based on your role, your region, and your business type. This strategy alone often saves painting businesses $8,000 to $15,000 per year in taxes. Same money, less tax, more control. Section 3, pay yourself the roles that you actually play. Now here's the part most owners really need to hear. Your compensation depends on the roles you actually play in the business. If you're acting as a salesperson, the production manager, the office administrator, or the executive leader, you should be compensated for those roles. Here are some fair benchmarks in a painting business. Passive owner return is 15%, as we said. Sales is 7 to 9% of what you close. Production management is 4 to 7% of what you manage. Admin is 2 to 4%. Executive leadership, 3 to 5% of revenue. Now, if you're doing these jobs and not paying yourself for them, your margins aren't tight, they're broken. Section 4: Real numbers example. Let's say your painting business does $750,000 per year and you're wearing every hat except for painting on the job site. Now, before you freak out, this is not all salary, this is total discretionary earnings. And here's how the math looks: sales role, about 7%. Production management, about 4%. Admin, about 3%. Executive leadership, about 4%. And owner return 15%. That totals roughly to 33% of revenue. Now pause. That does not mean you're paying yourself a $247,000 salary. It means the value you're creating is worth that. For example, you might pay yourself an $80,000 salary on payroll and take the rest as profit distributions. Same total compensation, way more clarity. Section 5, how owner pay evolves as you scale. Early on, your pay is higher as a percentage of revenue because you're doing everything— sales, production management, admin, CEO. As you scale, you remove hats, you replace yourself, and you keep the owner return. The goal isn't less money, the goal is less chaos. Section 6: Case Study Chris. Let me give you a real example. Chris runs a painting business in North Carolina doing about $750,000 per year. When he came to us, he wasn't on payroll. He took random draws, cash was stressful, and he worked nonstop. And we did 3 things. First, we defined his roles. He was the owner, the salesperson, the production manager, the admin, and the executive team. Second, we built a tax-efficient structure. We filed an S-corp election, set a $65,000 salary, and had him take the rest as distributions. That alone saved him $15,000 per year in taxes. Now third, we fixed the business numbers. Gross profit went from 38% to 50%. Overhead dropped. Cash flow stabilized. Now he has predictable pay, predictable distributions, and no guessing. Section 7: The 3-Bucket Owner Pay Model. If you want to pay yourself correctly, use this simple framework. Bucket 1 is salary, W-2 pay for the work that you actually do. Bucket 2 is distributions. Profit paid, monthly or quarterly. And bucket 3, bonuses. And these are optional performance-based. Simple, clean, defensible. Let's simplify this. If your painting business can't produce a 15% owner return and can't pay you fairly for the roles that you fill, the problem isn't your business. The problem usually isn't you, it's your margins. Owner pay is downstream of pricing, labor efficiency, and overhead control. In the next video, I'll show you how to budget a painting business so that the owner pay math actually works. What gross margin you need, how much overhead is healthy, and how to stop guessing on what you should pay yourself. Click the video on the screen now. Get the margins right and paying yourself stops being stressful.
