Episode 042. You Didn't Start an Agency to Be the Lowest-Paid Employee

13 Jan

How to actually enjoy the money your agency is making without guilt, chaos, or burnout. That's the conversation we're having today, darling—because too many successful founders are still living like freelancers.

You're hitting revenue goals. You're paying contractors, employees, covering taxes and expenses. But you're not paying yourself what you're worth. You're taking tiny distributions when cash flow is good and feeling guilty about everything in between. And if we're being honest? You wouldn't accept the job you have on paper—with that salary—from anyone else.

In this episode, we break down the founder treat rule, the profit threshold bonus system, and percentage-based strategies that remove the guilt from paying yourself. Because your joy matters. Your wellbeing matters. And your lifestyle matters just as much as your agency's bottom line.

Successful Founders Shouldn't Still Be Living Like Freelancers (But You Are)

We see it constantly: founders running successful six or seven-figure agencies who are still operating with a freelancer mentality. They're reinvesting every dollar. They're paying everyone else. They're covering all the costs. But when it comes to their own compensation? They're paying themselves a fraction of what they're actually worth.

And here's the question that should stop you in your tracks: Would you accept the job you have on paper—with that salary—from anyone else?

Usually not. So why are you accepting it from yourself?

This isn't just about money. When you're not paying yourself what you're worth, you start to resent your business. You resent your employees because you see what they're making. You hesitate to give bonuses because you're thinking, "If I give them that bonus, they'll be making double what I make." That resentment bleeds into your decision-making, your leadership, and ultimately your business growth.

By paying yourself what you're worth and creating a compensation structure that actually makes sense, you're not just taking care of yourself. You're creating the financial foundation that allows you to think bigger, make bolder decisions, and expand your business with confidence instead of scarcity.

The Data Is Clear: Paying Yourself Isn't Selfish—It's Strategic

Let's look at the data, because this isn't just feel-good advice:

Founders who regularly pay themselves report 19% higher business satisfaction than those who reinvest everything (Journal of Entrepreneurship, 2024). When you're taking care of yourself financially, you actually enjoy running your business more. That joy translates to better work, better client relationships, and better outcomes.

Consistent founder compensation is one of the top predictors of business longevity in companies under $2 million (Small Business Finance Report, 2023). Agencies where founders pay themselves consistently are more likely to survive and thrive long-term. Why? Because founders who feel secure make better strategic decisions.

Founders' wellbeing correlates more strongly with personal financial stability than business revenue (Gallup Wellbeing Index, 2022). You can hit every revenue goal in the world, but if your personal finances are a mess, you won't feel successful. The inverse is also true: when you're financially stable personally, your business benefits.

Harvard Business Review found that founders who pay themselves consistently have measurably higher strategic decision-making capacity because compensation reduces the threat response in the brain. When you feel secure, you take smarter risks. You think long-term. You make decisions from abundance rather than scarcity. That's the competitive advantage no one talks about.

Every Founder Needs a Recurring Treat—Plan It Now, Not Later

Every founder needs a recurring, planned, guilt-free treat that reconnects you to the joy of earning money and running your business. Not "if I hit this goal, then I get this." Just a regular thing you do because you work hard and deserve it.

Examples:

Monthly facial or massage
Weekly fresh flowers
Overpriced coffee without guilt
Quarterly solo retreat
That pair of shoes you've been eyeing

The key is planning these in advance. Don't tie them to hitting goals. Tie them to the work you're already putting in. Book that quarterly retreat now, before you know what March revenue will look like. Buy those flowers every Sunday. Schedule that massage on the first Friday of every month.

Why? Because when you plan in advance, it's not a debate about whether you deserve it. You already decided you do. And here's the secret: treating yourself might actually be what helps you hit your goals. When you come back from that retreat inspired and energized, you make better decisions. When you're not burnt out, you show up differently for your clients and your team.

Think about it: if you book these things in advance and then have a tough month, you might be tempted to cancel. But you've already paid for it, and honestly? You worked hard regardless of what revenue looked like. That tough month is exactly when you need the reset most.

Stop Taking Distributions When You Feel Like It—Build a Real System

Here's how most agency founders currently pay themselves: they take a huge distribution when they have a great month, then nothing for months. This creates a cycle where it feels like you only make money when you have an incredible month. That's not sustainable, and it's definitely not smart.

Instead, create a system with three components:

1. Base Salary First, diagnose your financial health and determine a healthy base salary—one you can live off of regardless of how the business performs. This is non-negotiable money that hits your account every month. It covers your life expenses and gives you stability.

Ask yourself: What salary would you need to accept this job from someone else? That's your baseline.

2. Percentage-Based Savings Carve out percentages for taxes and business savings that happen automatically, regardless of profitability. This protects you from the feast-or-famine panic that comes with irregular founder pay.

3. Profit Threshold Bonuses This is where it gets interesting. Determine a profit margin threshold where it becomes safe to take additional distributions. For most agencies, 20% profit margin is a good starting point.

The rule: If your profit margin is above 20% that month, then 2.5% of revenue becomes your founder bonus. If you hit 30% or higher, take 5%. If you're at 40%, you can even allocate 5% to employee bonuses while still taking your cut.

These aren't arbitrary numbers you debate month by month. They're rules that make the decision for you. When you hit the threshold, you take the bonus. No guilt. No second-guessing. The system decided.

Percentage-Based Bonuses Are the System That Decides for You

The brilliance of percentage-based distributions is that they normalize founder pay. It's not "I had a good month, so I'm taking $10K." That approach can put you in the red next month. Instead, it's "Our profit margin hit 25%, so the system automatically allocates 2.5% to my bonus account."

By doing it this way, you're ensuring the business stays healthy while you're getting rewarded for high performance. And here's the tax advantage no one talks about: when you give money to employees (including yourself) as bonuses, that money comes out of your annual profit before taxes. You're rewarding the people who make your business possible and paying less in taxes. That's smart business.

Meredith walks her clients through setting up separate bank accounts for this—one where 1-2.5% of revenue automatically flows into a "fun account." It might feel small at first, but over a quarter, you could have $5K-$10K sitting there guilt-free. That's your monthly massage money. Your quarterly retreat fund. Your "I've been eyeing those shoes" account.

When you make a purchase from that account, it doesn't feel like splurging because that money exists specifically for joy. The question isn't "Can I afford this?" It's "What do I want to spend this joy money on?"

There Is No Expansion Without Treating Yourself First

We're in a season about expansion. And there is no expansion if you're not treating yourself. There is no sustainable growth if you're depleted, resentful, and constantly putting yourself last.

So many founders put their joy last. They worry about their partner, their kids, their employees, their contractors—everyone except themselves. But here's the reality: your joy matters. Your wellbeing matters. Your lifestyle matters.

Treating yourself isn't an expense. It's an investment in being the best version of yourself as a founder. In the same way that employees need motivation and incentives to keep going, so do you. Especially when you're bearing the brunt of the hardest moments in business and protecting everyone else from it.

Make this your best financial year yet. Set up your base salary. Create your profit threshold rules. Open that fun account. Book those quarterly retreats. Buy those flowers. Schedule that massage.

Because the version of you who's financially secure, guilt-free, and regularly refilling your cup? That's the version who builds the agency you actually want to run.

(00:00:00) Why Founders Struggle to Pay Themselves What They're Worth

The reality of successful agencies where founders still live like freelancers
Why paying everyone else but yourself creates resentment
The question every founder should ask: "Would I accept this job from anyone else?"
How underpaying yourself impacts your ability to give bonuses and think bigger

(00:03:15) The Founder Treat Rule: Recurring Guilt-Free Joy

What the founder treat rule is and why it matters
Examples: monthly facials, fresh flowers, quarterly retreats, overpriced coffee
Why these should be planned in advance and not tied to hitting specific goals
How treating yourself fuels creativity and better decision-making
The power of booking things in advance to remove the "do I deserve this?" debate

(00:08:12) Stats That Prove Founder Compensation Drives Business Success

19% higher business satisfaction when founders pay themselves regularly
Why consistent founder compensation predicts business longevity
How founder wellbeing correlates more with personal financial stability than revenue
Harvard research on how compensation reduces brain threat response and improves decision-making

(00:09:11) Creating a Base Salary + Bonus Structure That Works

Why the current approach (big distributions in good months, nothing otherwise) doesn't work
How to diagnose your financial health and set a healthy base salary
What salary would make you accept this job from someone else?
Why base salary should be consistent regardless of business performance

(00:14:00) The Profit Threshold Rule for Guilt-Free Distributions

How to create a profit margin threshold for taking bonuses
Why 20% profit margin is a good starting point for most agencies
The rule: 20% profit = 2.5% bonus, 30% profit = 5% bonus
Why digital marketing agencies may need higher thresholds than PR agencies
How percentage-based bonuses keep your business healthy while rewarding high performance

(00:18:00) Percentage-Based Systems That Normalize Founder Pay

Why percentage-based distributions remove guilt from taking money out
How this prevents putting yourself in the red next month
The tax advantage: bonuses reduce your taxable profit
Why rewarding yourself and employees is actually smart tax planning

(00:21:00) Creating Your "Fun Account" and Treating Yourself Intentionally

How to set up a separate bank account that automatically receives 1-2.5% of revenue
Why small percentages add up to $5K-$10K per quarter
The psychology of having money designated specifically for joy spending
How tools like Copilot help you visualize and track this guilt-free fund
Why spending from this account isn't splurging—it's what the money is for

(00:24:20) Why Your Joy Matters for Business Expansion