THE ENTREPRENEUR'S SALARY

Accelerate your business with these expert tips on "The Entrepreneur's Salary". Analyse and discover this TIP!

Does it make sense to put a big salary in your forecasts from the very beginning of your company? The more you raise your salary before you make a profit, the more you are burdening your company's accounts. The logical thing to do is to set a minimum wage in order to survive, and only raise it when possible, when you reach one of these milestones: break even (see TIP), go into profit, close down funding round (see tip). Alternatively, you could also account for your salary at market value, as an accrued expense, and leave the uncollected part with the company as a debt owed by the company to its employees/partners.....

Remember that the The maximum salary is set by labour legislation, depending on your collective agreement and your professional category, you can receive a maximum of "xxxxx". Above this amount, you will have to be paid in the form of dividends, which are subject to withholding taxes, etc. That is to say, you will have to take from the company theThe benefits are paid out in the form of a salary up to a ceiling and the remainder in the form of dividends. 

• Where do the founding partners record all the hours they have put into the project without being paid? 
• Who pays for them? It is a personal investment made by the partners in order to be able to earn much more money in the future.
• Can I try to collect them from the future investor? The valuation of your company will include the investment you have made in your company, and if those hours were well invested, the value of your company will be high and you will be able to recover them. If your hours invested have not served to create enough value to be able to find an investor... you will not get anything back!

One of the hot topics in the entrepreneurial ecosystem that generates the most discussion and questions is the salary that the founder of a company should receive. startup.

There are usually two opposing positions

• First position: the entrepreneur must allocate himself a good salary
• Second position: It should be as low as possible. What do you think?

WHY SO MUCH FUSS ABOUT WAGES IN ENTREPRENEURSHIP?

Although it may seem a trivial issue, it is a decision, which is not a trivial one.The project will have a clear and tangible impact on the future and quality of life of the entrepreneur. A high salary possibly will motivate the entrepreneur, but will shorten the life of the start-up, and a low pay will extend that life, and other side effects... but at the cost of no stable income.

As they say: "The entrepreneur is a person who accepts to live a few years as most would not want... in order to live the rest of his life as most will not be able to".

Given that this is an issue on which I do not have a clear position (possibly depending on the specific case) and that I believe it is an important issue of concern to all of us.

I propose two articles, both absolutely convincing on one position and the other.

IN FAVOUR OF LOW PAY

Great figures in the start-up sector, of whom I have an absolutely positive opinion, such as François Derbais and Marek Fodor, advocate that, at least at the beginning, entrepreneurs should assign themselves the lowest salary they are personally capable of assuming.

THE REASONS ARE CLEAR AND MAKE SENSE:

• They demonstrate a commitment to the future of the company.
• It allows you to spend less time looking for finance and more time growing your business.
• It allows you to keep a higher percentage of the company (as you will need to borrow less money).

AGAINST LOW PAY

On the other hand, there is an opposing current of thought, championed by Agustín Cuenca and Daniel Brandi (undoubtedly a point of reference), which argues that precisely at a time as complicated as the launch of an entrepreneurial initiative, you should be motivated by a good salary.

THE REASONS, TOO, ARE CLEAR:

• An investor who understands what he is investing in wants a happy and motivated founder given what lies ahead.
• In practice, if you lower your salary, the investor is buying your work below the market price.

How should the entrepreneur's salary be set?

Setting an entrepreneur's salary can be a challenging process, as there is no single formula for doing so. Here are some general tips:

1. Analyse cash flow: It is important to understand the income and expenses of the business to get an idea of how much can be allocated to the entrepreneur's salary. If the business is new or in an early growth phase, there may not be enough income to pay a high salary.
2. Research the market: Researching the salaries of entrepreneurs in the same industry and in companies of the same size can be useful to get an idea of what should be paid.
3. Take responsibilities into account: The entrepreneur's salary should reflect his or her responsibilities within the company. If the entrepreneur is the sole founder and performs most of the tasks, he/she may have to assume a higher salary.
4. Establish a starting salary: It can be useful to set a starting salary and review it after a certain period of time, e.g. after six months or a year. This can allow for greater flexibility if income changes significantly during that time.
5. Be realistic: It is important to be realistic about the salary that can be paid. If the entrepreneur's salary is too high, it may affect the ability of the business to grow and develop properly. On the other hand, if the salary is too low, it may affect the entrepreneur's motivation and ability to remain committed to the project in the long term.

In general, setting an entrepreneur's salary requires a balance between the need to adequately compensate the entrepreneur's work and responsibilities, and the need to ensure that the business has sufficient resources to grow and develop.

Create a case study for an entrepreneur to learn how to put his salary on the line

Suppose John is an entrepreneur who has founded his own digital marketing consulting firm and has been working hard to establish and grow his business for the past two years. Now, he is faced with the challenge of determining what his salary should be as founder and CEO of the company.

STEP 1: ASSESS THE COMPANY'S FINANCIAL SITUATION

Juan needs to have a clear understanding of his company's financial situation before determining his salary. He needs to assess the company's monthly income and expenses and ensure that the company is generating enough cash to cover its operating expenses and have some emergency reserve.

STEP 2: DETERMINE THE MINIMUM WAGE REQUIRED

John needs to determine the minimum wage necessary to allow him to live and cover his basic needs, such as housing, food, transport and other personal expenses. This may vary depending on the location and lifestyle of the individual.

STEP 3: CONSIDER YOUR ROLE IN THE COMPANY

As founder and CEO, John has a great deal of responsibility for the company and his role may require specialised skills and experience. He should consider how much his time and experience is worth to the company and determine a fair salary based on this.

STEP 4: ASSESS THE SALARIES OF OTHER CEO'S IN THE SAME SECTOR

John should research what the average CEO salary is in his sector and company size. This will give him an idea of what a CEO is expected to earn and help him determine whether his salary is fair and reasonable.

STEP 5: ESTABLISH A LONG-TERM COMPENSATION PLAN

In addition to his base salary, Juan may also consider implementing a long-term compensation plan that includes stock options, bonuses or target commissions. This can motivate him to work harder and contribute to the long-term success of the company. In a nutshell, To establish his salary as an entrepreneur, John should consider the financial situation of the company, determine his minimum salary requirement, assess his role in the company, research average salaries in his industry and consider a long-term compensation plan. By following these steps, John can ensure that his salary is fair and sustainable for the company in the long term.

Practical examples of how entrepreneurs from well-known companies have put their salaries on the line

As a reference model, the following are examples of how some entrepreneurs of well-known companies set their own salaries:

1. Elon Musk: Tesla and SpaceX CEO Elon Musk set his annual salary at just $1 in 2018. Musk has taken this symbolic approach to show his commitment to the long-term success of the companies he leads.
2. Mark Zuckerberg: Facebook founder Mark Zuckerberg received a base salary of $1 in 2013, but received total compensation of more than $653,000 thanks to other forms of compensation, such as bonuses and personal security.
3. Jack Dorsey: Twitter and Square CEO Jack Dorsey has not accepted a salary since 2015. Instead, he has received stock options that could be worth billions of dollars.
4. Jeff Bezos: Amazon founder Jeff Bezos has set his base salary at $81,840 since 1998. However, through stock options and other incentives, his net worth has grown significantly in recent years.

It is important to keep in mind that setting an entrepreneur's salary depends on many factors, such as the success of the company, the stage of growth, the level of investment and the long-term goals of the founder. Therefore, There is no single formula for setting an entrepreneur's salary and it is recommended to seek professional advice before making a final decision.

Most frequent mistakes made by entrepreneurs when calculating their salaries

Some of the most frequent mistakes that entrepreneurs make when calculating their salaries are as follows:

1. Do not separate personal finances from company finances: it is important to have a separate bank account for business and a separate bank account for personal finances. In this way, you can avoid confusing personal income and expenses with those of the company.
2. Do not consider taxes: Entrepreneurs often forget that they have to pay taxes on their income, so it is important to take this factor into account when setting their salary. Income tax can vary from country to country and jurisdiction to jurisdiction.
3. Failure to take account of business expenses: the entrepreneur must take into account the company's expenses, such as production costs, advertising and marketing costs, and overheads, before setting his or her salary. If the salary is set too high, it may jeopardise the profitability of the company.
4. Do not consider market value: The entrepreneur's salary should be in line with salaries paid in the market for similar roles. If the salary is set too low, it may be difficult to attract and retain talent. If the salary is set too high, it may negatively affect the profitability of the company.
5. Be unrealistic about cash flow: Setting a salary that is too high can affect the cash flow of the company, especially if the company is at an early stage. It is important to be realistic about the cash flow of the company and set a salary that fits the company's finances.

In a nutshell, Setting a salary as an entrepreneur is a complex process that requires a careful assessment of business income and expenses, taxes and market wages. It is important to avoid common mistakes and to be realistic about the company's finances in order to establish a sustainable and fair salary.