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Bhavik Jain .

𝗛𝗒π—ͺ 𝗗𝗒 𝗬𝗒𝗨 𝗣𝗔𝗬 𝗬𝗒𝗨π—₯π—¦π—˜π—Ÿπ—™??πŸ’°πŸ’°

In the π—˜π—”π—₯π—Ÿπ—¬ π—¦π—§π—”π—šπ—˜π—¦ of building your business, how did you decide to pay yourself?

How do you pay yourself now as compared to the starting phase?

Originally Posted Here
19 Comments

Namit OberoyΒ 

I pay myself a very meagre salary

Bhavik JainΒ 

Β on what basis do you decide the salary?

Namit Oberoy

Balance

If the company cannot afford me yet: What's the bare minimum the company can burn on me to be able to run it without affecting my ability to grow it, to genuinely pour my heart and soul into its growth? Considering all the financial limitations I may personally have, what's the best bargain the company can get without building angst or resentment in the founder ?

When the company can afford me: What's a reasonable number the company can pay me as it's Chief-Everything-Officer, so that I don't have to bother about any single thing other than the company's growth.

It's worth remembering that if you're a 99% shareholder, your company's future is basically your interests. Take the least from your present that you can possibly you can, so that your future can be prosperous. Delayed gratification in a nutshell

Bhavik Jain

Thats a good way to look at it but do you point those bare minimum and calculate the amount or you roughly decide on a percentage?

Namit Oberoy

Β Nah no percentages.

Tushar JainΒ 

Negligible pay, money goes in building the business.

Jyotirmay Saha

same

Bhavik JainΒ 

Tushar Jain and Jyotirmay Saha how do you decide the amount?

Jyotirmay Saha

Just to cover my personal expenses + Bills, in future when profits roll in a fixed percentage would be an ample reward

Tushar Jain

same as what Jyotirmay said;enough to afford my most basic needs. Have to literally spend from my savings but that's how it is.

Siddartha Khetan

Obviously more money as reinvestment and less amount as salary

Bhavik JainΒ 

How do you decide on the percentage?

Siddartha Khetan

first priority is how much fund your business needs as reinvestment at that instance to scale.

Then only we can decide on the percentage.

To me there is no magic formula in this aspect.

Also, I will be okay if the percentage varies from month to month.

Mahtab Alam

I find this post and the responses to the post very interesting. I have been paying myself a decent salary and variable pay to compensate for the hit I took on salary compared to my job days from the very beginning. One has to plan this properly. One should not fool oneself on profit or performance numbers by making your cost nil. Book the cost at least if you can't withdraw at present and take it out later. By not doing so , you are spoiling your own ITR , misrepresenting your business numbers. Further the profit part too needs to be planned. How much you save for future instead of reinvesting everything. Your salary too has to allow you to create savings, insurance etc on personal front and you should not mix up your personal finance with your business finance. I understand that some businesses may find it difficult but then you are planning it wrong somewhere. In your first plan sheet itself one needs to provide for salary. Now this salary may be less than market cost and the same will be compensated through quarterly dividend, sales incentives etc etc etc. In fact even when me and my associates have made investments, we have always analyzed the salary for the founders and the ideal amount they need to withdraw. At times we decrease the amount demanded in other cases we made them provide for it when the claimed amount was nil.

Tushar Jain

what if the business is bootstrapped and yet to reach the profit state. What you are saying makes sense for businesses that have raised an investment or are profitable. That leaves a large chunk of businesses out.

Vishnu Vardhaan

I took almost no salary for my first six months, post which I started to.
When I started to draw salary, I realised a unique pattern.
What I will say will seem counter intuitive, and contrary to what investors will tell you - but, I've scaled crazily over the past year, and I can testify for bootstrapped businesses.
Pay yourself first.
You will feel great.
Don't care what that amount is.
2k, 5k, 10k, 50k.
Whatever.
But pay yourself. First.
And then everyone else.
If you don't value yourself, nobody else will.
Give it to yourself as a gift.
For the hardwork you put in.
Trust me, it will give you a mindset shift like no other.
Otherwise, you'll keep firefighting throughout.

Shivam Malhotra

what you basically mean is don't live on a tight budget to scale the business and you don't have always have to give yourself a salary for the same.I have a pretty good lifestyle for a 24 year old but I've never paid myself a salary and I dont intend to in future as well (this applies only to single founders).

Sandeep Balaji

Ok. Few thoughts here.based on my different venture over the last 13+ years. Disclaimer: Two scaled to almost $1Mn or $1+Mn ventures. Pay yourself based on what you gauge you can take our of your business, nature of the business, how much cash you needas buffer and how much cash you need in Opex to scale quickly or immediately over 3-6 months. Several rationales I use to say this. Not taking money out of the business is really not worth your while, unless you have given a time frame 3, 6 or 12 months to take a salary. I have gone wrong on this(setting a time frame). Don't take all the money out. Always keep a buffer or leave it in the business. Even if it's a recruitment or consulting or Ibanking business. Leverage happens if money can buy you time, resources to increase opportunities or ability to get a higher Return on Equity. Cost/Cash spend by you is an expense. Today I follow a rule of thumb in my businesses as well as advice the entrepreneurs/startups where I am involved as either an investor or advisor- Keep 4months to 6months cash in hand. And this was a pre-Covid advice as well. My rational is that if you draw a nominal or medium salary and keep a 4-6months buffer on steady state. Then worse cash you can operate on NO salary + Cut cost to survive for 8--9 months. And that runaway is good( Unless you are the global airline industry:)) Hope this helps.

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