Founders: Don’t Underpay Yourself

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June 7, 2006 by Dane Carlson | 1 Comment

Adventures in Capitalism:

I always advise company founders not to underpay themselves. Underpaying yourself isn’t a noble sacrifice, it’s a distortion. If your business can’t turn a profit paying market salaries, maybe it’s not such a good business.

Of course, it’s hard to draw this line sometimes, especially when you’re a first-time founder. When I started my first company in 1999, I am ashamed to admit that I paid myself a salary of $75,000. There was no good reason to. Heck, I paid the CEO I recruited to replace me $180,000.

I’ve talked with a number of friends, and all of them agree on this point. But now I even have an HBS study to back me up.