How much should founders be paid?

You can scream and cry all you like, but the horrible truth is, being a startup founder isn’t all ripped jeans and iced lattes (although that does make up as much of my day as possible, obviously) – it means making sacrifices. That means earning much less, for much more work. But what is the magic number?

1. Bootstrapping vs. funded company

If you’re bootstrapping your business on your own, it’s really up to you what you want to get paid. Go ahead, pay yourself loads – but chances are, you’ll run out of money and end up working for The Man again in two months (and didn’t we all start this crazy ride to get away from corporate slavery?)

If you’ve got investors on board, the game changes. You have to be able to justify your monthly wage to people who are going through your business plan with a fine-toothed comb and wondering when they’re going to see a return. And if they realise that 90 percent of the cash is going straight back into your pocket, then, well, they’re not going to be very happy.

2. Previous salary

No matter what industry you’re in or what product or service you’re unleashing upon the world, no one gives a crap that you used to be incredibly senior in your old job, and that you earned six or seven figures. Everything you would use to calculate your salary in the normal marketplace is irrelevant when starting your own business.

All that really matters is how much of a drain you are going to be on your own company.

3. Speed of growth

Your salary can set the bar for the success of your business. When you start making money, what are you putting it towards?

If you’re putting the majority back into research and development, marketing, or new revenue generation, then your business is going to do a lot better. But if a decent chunk is being spent on salaries, how is it really benefitting the business? You might be the unicorn who personally generates high revenues for the business quickly (and so perhaps you can justify a fatter paycheck to investors) but trust me, those examples are far and few between.

4. It’s called sweat equity for a reason

Investors want to see your blood, sweat and tears. You’re expected to work your ass off for practically nothing – that’s just the way it is. From an investor’s point of view, they might be putting in $100,000 or $1 million, and getting 5 percent or 20 percent of the company in return. This means investors have a relatively small amount of the company but have put in all the money, while the CEO has majority shares but has actually put in very little. You can see why they want you to sweat, right?

5. The magic number

So, with that being said, I think a startup founder in Singapore should be getting paid:

Between S$2,000 and S$5,000

This might not seem like a lot to people who have reached the top of their careers and then decided to venture out on their own, but when the business is just beginning it is essential that the money is being used to grow it, not fund your lifestyle!

If you are paying yourself more, there are really only 2 justifications: