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Personal Compensation


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Few entrepreneurs are in a position to operate a company without pay. In planning the financial aspect of a startup, it’s important to consider if there’s enough capital to compensate the founders and their team. Many startups fail because of inadequate capitalization to cover executive pay.

While there is an understandable temptation to get by without generating an income, the better plan is to factor in compensation or at least a livable wage for founders and the team before embarking on the startup journey. Taking a regular salary also avoids dipping into capital that's meant to extend the company’s runway to meet unexpected personal expenses.

While company shares will at some point have value that could be converted to cash, it’s not realistic to rely on future liquidation as a sustainable source of income. Realistically, your company is unlikely to actualize profits during the first few months of operation. There must be a means to compensate the founders and their founding team in the early stage of capital planning.

 

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