What Should Your Salary Be When You’re Just Starting?

what should i get paid

“I need to make $60,000,” “Mary”, the CEO, said to me. “Is that too much for me to make?”

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“Maybe. Maybe not,” I replied. “I can’t just give you a yes or no answer. You have to walk through some steps.

“There’s a very simple rule to figuring out your salary after you’ve just raised a round of angel funding. Before I walk you through this very simple rule, let me explain what the rule isn’t:”


A. You don’t determine your salary based on what other startup CEOs are making.

“It’s irrelevant in your situation what other CEOs are making. There are too many other variables,” I said.

You have to consider all of your costs. You have to forecast your revenue, if you have any. And you have to know what you’re going to pay the employees you have, and the employees you expect to have for the next two years or so.”


B. You don’t determine your salary based what you’d like to make.


“But, I really need to make $60,000. My husband just lost his job, and we need the extra money,” Mary said.

“I understand the challenge. However, I know your husband’s situation is relevant to you, but it’s not relevant to how you run your company.

“If cash is that tight, maybe starting a company isn’t right for you at this time. You’ll make more money working for a larger company,” I said.

“No,” Mary said. “That’s not an option for me. Now’s the time for me to start this company.”


You determine your salary based on three things:


“Okay,” I said. “Let me walk you through the steps you’ll need take to figure out how to figure out your salary.”


A. Your budget and financial plan for at least the next 24 months.


“You have to start with your overall plan for the next 24 months. Why 24 months? That’s easy,” I said. “You need to money to last 18 months, ideally 24 months, so you’re not in perpetual fundraising mode.”

Mary nodded her head.

“Fundraising takes, on average, around six months. But it can take longer. In my case, it took us two years to raise our initial funding, so you just never know.”


B. The salary requirements of the other people you have hired and intend to hire.


“Then, you have to look at what you’re going pay everyone else you’re going to hire,” I said. “My basic rules regarding pay is really simple:

  • “The first group to get paid full market salary are the entry level employees. They’re the ones that need the money the most.
  • “The second group to get paid full market salary are the mid level managers and mid level individual contributors. Then, you just keep going up the ladder.
  • “Until you hit your management team. They’re the final group to get paid full market salaries. But the last person to get paid a full market salary is you.

“I’m not going to be able to make $60K a year,” Mary said. “Not with the amount of money I’m raising.”

“Then you can’t,” I said. “But that’s a better solution than you running out of money too soon.”


C. How much money you need to keep your company going, based on your worst case assumptions for at least the next 24 months.


“The final piece of the puzzle,” I said. “Is you can’t just assume everything is going to work out the way you want.

“You need to do some worst case planning. For example, most entrepreneurs overestimate how quickly revenue will ramp. You should have a significantly reduced forecast and run the company to a plan that supports the reduced revenue.

“That way, you won’t run out of money too fast.”


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