BENEFITS

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How to Figure Out Your Own Compensation

QUICK SUMMARY

When your business is in its early stages, it may not earn enough to pay you a regular salary. Here are some options to consider to help get through the start-up period.
 

Pay Yourself What You Can

During the early stages of your business, you need to keep business overhead down. Try to be reasonable. How much compensation can the business afford? You may have to make some sacrifices or think creatively.

advantages

This seems fair for a young company with limited resources.

  • Reasonable, realistic
  • Flexible

disadvantages

You might strain your own finances or put the company in an unrealistic or unsustainable situation.

  • Shelters company, could create an unrealistic framework
  • May be too big a personal sacrifice for you
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Pay Yourself Based on Industry Standards

Your company operates in the real world, so it should pay salaries at a realistic level. This means at or near industry standards.

advantages

The sooner that your business operates to industry standards in all aspects, the better.

  • Less financial strain for you
  • Puts the company on a realistic track
  • Demonstrates responsible financial management

disadvantages

This could put an unnecessary strain on the firm’s financial resources.

  • Could squeeze company budget
  • Could take resources from more essential areas
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Postpone Payment (Use It as a Loan to Your Company)

This gives you credit for the fair value of your time. But it postpones compensation.

advantages

This is a creative and flexible compromise solution.

  • Eases financial burden
  • Recognizes your need for fair compensation
  • Shows smart management and long-term commitment

disadvantages

It could create additional administrative tasks.

  • Possible tax or accounting issues
  • Could create confusion over your actual salary
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Pay Yourself More Later (When the Business Can Afford It)

This is another form of postponed payment. Rather than treat it as a loan, simply start with a lower salary. It can rise later as the company matures and is able to pay you more.

advantages

This is a simple, reasonable, common-sense solution.

  • Flexible for the business
  • Flexible for you
  • Shows smart management and long-term commitment

disadvantages

This arrangement might appear too casual and could detract from the business’s image.

  • Might look unprofessional
  • Could create questions, or raise red flags
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