Does a founder need a salary, while starting up?
Jul 20 2012, 14:17 | By SME Mentor
Starting a business with one's savings or through an investor is a dream come true for many. But, a few months in, and the business is slowly taking off is a sign that they are on the right path. However, this is also the phase when the founders realize they have expenses, and needs which needs to be fulfilled. There are some books that say "founder's salary should be bare minimum, while others say they should take a reasonable salary, after all they earned it". So, is there a right salary that the founders should take? If so, then how much?
Business comes first
Pooling in all available resources is how many businesses are born. Narayanan, founder of Effect works and co-founder at NFN talks about how during the early days of NFN, none of the co-founders took home a salary. "We only take enough to meet our monthly expenses, but over time, and infact my 1st company Effect works was funding my 2nd venture NFN [in all there are 4 founders]. Maybe in a month or so, when we see the returns pouring into NFN, we will start taking a fixed amount as salary. The entrepreneurs should keep the business as their focus and look at salary only when they reach a phase where revenues are stabilized or accelerating.
Not high but not low
The amount taken as salary should not be so low that it does not matter, but at the same time it cannot be too high, as then the business would suffer. Most founders start with Rs 20,000 per month as salary and gradually increase as business grows. Senthil Nayagam, the co-founder at Railsfactory shares his experience "when we began, we did not take any salary. I was married while my co-founder was bachelor. And we both had a job that was bringing in the money, but soon we were both completely focused on Railsfactory. That is when we decided to take a salary. Back in 2006, it was a small amount, but today we take home enough to sustain our expenses, afford a car and a home as well. It has been an organic growth, but one that we are sure will take us to great heights in the coming years."
Even though the entrepreneur devotes all their time and energy towards the business, they need something more than passion to motivate them. Anjana Vivek of Venture Bean consulting says "till now it was just me running and managing the business, but soon there will be 2 more directors and we will be deciding on the salary we take every month once they come onboard. The salary is a driving force. I do earn through the lessons i take at the Management institutions, but taking home a salary from the business i drive is an added positive." Krithika nelson talks about how she and her co-founder Theyagarajan Sundaramoorthy at Shopo.in started taking home a fixed amount as salary not only to sustain their expenses but as a way of rewarding themselves for all the effort that goes into the business.
So, remember, just because you want to branch out on your own does not mean you are left penniless at the end of the month!.
Post Your Comment
Recent Comments (2)
May 22 2013, 21:18
May 22 2013, 21:12