By September 18, 2018

How To Pay Yourself As A Startup Founder

By September 18, 2018

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Do you pay yourself? Funny but important question!

At the end of each month, one of the things you think about is staff salaries and wages. Do you have enough to cover them for the month?

Apart from that, you also have to think about operating costs for the upcoming month.

We have heard over and over again that you should pay yourself. However, some people are of a different opinion.

Some of us are always tempted to reinvest every profit back into our business, while some others have a principle of setting aside some gains for themselves.

Credit: Giphy.com

However, it is important to understand that you don’t have to pay yourself at the early stage of your business; but when your business begins to experience growth, you should begin to think of paying yourself. Do not deprive yourself of your salaries.

In addition, some founders are of the opinion that you should only pay yourself when you have investors. That shouldn’t be so; you should pay yourself whether you have investors or not.

According to Eric Siu in this article, “Many investors are understandably wary about founders who want to take lavish salaries from day one. That’s understandable. Investors want to see that you’re as heavily invested, if not more so, than anyone else in the company’s future. Forgoing an annual salary until the initial startup phase is over and your company is profitable may be part of their initial expectations.”

However, just because you should pay yourself when your company grows doesn’t mean you should jeopardize the growth of your business. It is important to pay yourself fairly and not greedily.

Research about your industry as well as how best you should calculate your salary before paying yourself. Likewise, your salary has to be a good fit for you and for your startup. You work so hard on your business; you should assign yourself the right amount when your business starts growing.

Tech Republic quotes  Dino Vendetti, General Partner at Seven Peaks Ventures in Oregon in this article who says, “As a founder, if you are very conservative in what you are paying yourself, you are setting a standard for better alignment with your investors, and maximizing what all parties/shareholders are getting out of each round of investment, and thus — less dilution for all shareholders.”

Do you pay yourself? How do you calculate your payment? We would love to hear from you below.

 

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