The startup founder salary is always a sensitive issue. However, does this mean that the founder should not receive any compensation? In fact, it all depends on the situation of the startup in question, its financial health and the role the founder actually plays in the company. What is the average startup founder salary? Read on.
What is the average startup founder salary? – table of contents:
- Startup founder salary
- Cash flows
- The stage of a startup
- Startup founder salary vs. employee compensation
- How to calculate a startup founder salary?
Startup founder salary
Any startup founder quickly learns that running a company is not that easy. It’s especially difficult in the early days of a startup, when the founder is forced to work under constant pressure, often beyond measure, and does not receive any salary.
The salary of a startup founder is always a sensitive issue or at least a debatable one. Should a startup founder be paid just like any other employee? The idealistic view says that startup founders should not make any money in the early days of the company. However, what if the founder also serves as a CEO? Shouldn’t each employee receive a salary if they are on the payroll? What is the average startup founder salary?
For starters, you should take a look at your startup’s cash flow, that is, how much money is flowing in and out of the company. The founder’s salary should rely on it as at the early stages of startup development, it is not yet possible to talk about its profitability.
Depending on the source of money, you need to make a rational decision as to whether collecting a salary makes sense at all. However, when you are on the payroll (e.g., in the CEO role), it’s best to talk to the board about compensation right away. Studies show that founders receive between 8 and 12 percent of the funds at their disposal.
The stage of a startup
The more a startup grows and the more profits it generates, the higher the founder’s salary may also be. The level of the founder’s salary should depend on the company’s situation, and this is often also correlated with its phase. If the company is growing steadily and going through the next stages of development, the founder’s salary should increase as well.
Startup founder salary may also depend on the company’s industry, which affects how much funding you can obtain. For instance, tech founders working in sectors such as VR or e-commerce are usually better-paid than startup founders in industries such as farming or education.
Startup founder salary vs. employee compensation
In fact, startup founders should only be paid if they work like regular employees and are on the payroll. Otherwise, instead of a regular salary, they should receive dividends and commissions. Understand that being a founder doesn’t entitle you to a higher salary than everyone. If you can’t pay your employees much, don’t pay yourself much either.
How to calculate a startup founder salary?
First of all, start by assessing the financial health of the company. This will tell you if you are eligible for a salary or not. Then, calculate your budget taking into account all your sources of income and expenses. Decide how much money you will need every month or every week, and that will be your salary. Set milestones after attaining which you will give yourself a bonus.
A startup founder salary is always a controversial issue, especially in the early stages of the business. Here it is worth balancing the interests of the founder and the company. It is a common practice that startup founders don’t pay themselves anything at the beginning. The situation changes as the company grows and becomes more profitable.
Read also: 7 startup roles explained.
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