How much do startup CEOs pay themselves?
From starting out around $72,000 to just covering expenses, here are answers to the questions, “As a startup CEO, what do you pay yourself in salary, and how did you arrive at this number?”
- Started at $72,000 for the First Year
- $120,000 After Balancing and Considerations
- £9000, After Speaking to an Accountant
- 10% of Total Profits, Following the 80/20 Rule
- Based on My Performance
- I Pay Myself Nothing
- The Minimum Wage
- Enough to Cover My Bills and Very Little Extra
Started Around $72,000 for the First Year
I started paying myself $6,000 monthly when I established my FinTech company. Allocating a separate salary is discipline and a standard process I set to determine the actual profitability of our business.
It allows us to identify how much is our net income after deducting all expenses, including the salary allocations for my team. After one year of operation, we have noticed a consistent increase in our net profit, so I have given myself a 20% pay increase, which makes my yearly salary go up to a little over $86,000.
$120,000 After Balancing and Considerations
As a startup CEO, my salary is determined based on a few factors.
First, I consider the industry and market standard for CEO salaries. I research the average salary range for CEOs in similar industries and companies of similar size and stage to my own.
Next, I consider the financial situation and goals of the company. I ensure that my salary does not negatively impact the company’s ability to meet its financial obligations or reach its financial goals.
Last, I consider my own experience and qualifications. I consider my years of experience in the industry, as well as any relevant education or qualifications that I may have. Based on these factors, I currently pay myself a salary of $120,000 per year. This number is within the industry standard and allows me to cover my personal expenses while also ensuring that the company can meet its financial goals.
£9000, After Speaking to an Accountant
I’m based in England, so the rules are slightly different here compared to America. In England, as someone who’s self-employed, there’s a threshold where you don’t need to pay any tax at all. The figure is around 9000 pounds per year, and that’s exactly what I pay myself.
When I first started Rockstar Marketing, I had a conversation with my accountant and between us, we decided that would be best. I know of many other small business owners who do the same.
The business usually makes more than this figure every month, but I use the remaining to pay for tools, software, and freelancers. If there’s anything left over, I leave cash in the bank in case there are months where the business doesn’t make any money—rainy day money, so to speak. In the future, I would like to increase this, but for now, it works.
10% of Total Profits, Following the 80/20 Rule
Once a startup takes in revenue and makes a profit, only then should a CEO consider taking home a salary. What’s most important is having cash on hand to put back into our company.
Investing in your idea will lead it to success. Therefore, a CEO of a startup should only take what is required. I arrived at 10% of total profits with another 10% shared with our co-founder. This leaves us with 80% of cash available to reinvest or on hand for any emergencies. So essentially, I follow the 80/20 rule.
Based on My Performance
In my company, the total remuneration I receive is based on my performance. My salary is determined by a combination of factors, including the size and profitability of the company, industry standards for CEO compensation, and the current market value of the company’s equity.
This helps ensure I am adequately compensated for my efforts in building and running the business. I also use a variety of metrics to evaluate my performance, such as the company’s financial goals and customer/employee satisfaction surveys. If I am not meeting these targets, then my salary is decreased accordingly. If I exceed expectations, then my salary will be increased accordingly.
I Pay Myself Nothing
I’m 65, and I’ve worked 80 hours a week for over 40 years. I do it not for a salary but for a personal passion for innovation. While this approach may not be suitable for everyone, it can be a viable option for CEOs who are passionate about their product and will make sacrifices in the short term for the long-term success of their business.
By not taking a salary, the CEO can reduce the financial pressure on the business and focus on growing the company. If you treat your business as a family legacy, then you can focus more on building a successful business that can be passed down to future generations rather than on a personal salary.
The Minimum Wage
I didn’t have the luxury of giving myself a hefty salary because I wanted to keep the money rolling toward the company’s growth.
As a founder and CEO of my own company, many sacrifices had to be made-especially concerning my remuneration. My salary was just enough to cover personal necessities like rent and utilities. Every extra penny I take from the company for my salary is a missed opportunity for expansion. I knew, long term, that I would still be the one to benefit from the success of my company.
Enough to Cover My Bills and Very Little Extra
I pay myself a salary that’s just enough to cover my bills each month with a little extra (about 25%) to live. I probably earn less than everyone I ever meet. When you’re starting a business, plow any profit straight back into that business until it breaks even or makes more than it needs to expand.
You’re working on the future returns and the asset value of the company. These can grow far faster than any salary ever will. If you make a profit, take it in Dividends or a lump sum at the end of your financial year. Keep your meager salary, and work towards the future and your exit!
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