There's a myth that you shouldn't pay yourself anything when you're just starting out as a startup CEO. I'm going to break that myth in this video.
In fact, not only is it bad policy not to pay yourself first, it's dangerous. I'll explain why in this short video.
Read The Video Transcript Below:
Okay. This is a real dilemma for many startup founders, especially bootstrap startup founders, is what do you do when you're starting out? Should you pay yourself or shouldn't you pay yourself?
And the typical answer that you're going to hear is, Oh no, you can't pay yourself a salary., You have to live off of ramen or whatever. And there's some truth in this, but I have a contrarian opinion on this one. Let me explain why.
Let me explain what I think you should do. I believe it's really smart for you to pay yourself as soon as you can some sort of salary, even if it's $100 a month, even if it's $1,000 a month. Whatever it is, whatever small amount it is. I'm a big believer in paying yourself first.
Now, why is this and why do I think it's so important? Well, the reason is that you start a discipline of having a salary for yourself in the company as soon as possible.
This keeps you from this: I'm going to open the till, in other words, the cash register, and take money out when I need it. When things are better, because when things are better, maybe you're going to take too much money out and you're going to hurt the company and therefore hurt the prospects of the company.
So the idea of paying yourself something and being disciplined about what you're paying yourself gives the company a discipline as the company goes forward. Now the other wonderful thing about this, and the other reason why I really believe in this, is let's say your company is cashflow positive, but you're paying yourself $10,000 a year or $1,000 a month, whatever it is. So $12,000 a year,. And you know what? You're burning money, your family's burning money, you're burning money, but your company's cashflow positive. Are you really cashflow positive?
I don't think so. You need more. So the whole point of paying yourself a salary is that if you're doing this consistently all the way through, cashflow positive means not just that the company is cashflow positive, but that you personally are cashflow positive. Now, this doesn't mean paying yourself $1 million a year or some crazy salary. It does mean that you've created this discipline. So you know that when you get to be cashflow positive, it is truly cashflow positive and you don't overspend on yourself either. It keeps everything in check. It keeps you from doing undisciplined things, from taking too much money on the company. That's why I believe you should do it. I am Brett at Brett J. fox.com have a great, great day.