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MenuHow to restructure incentives and compensation for founders as start-up transitions to early stage and revenue?
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Hi,
If you were going to sell the business, the first thing a knowledgeable buyer (or investor) would do is normalize the wage expense vs. fair market.
If you and the other founders are not paying yourselves what you would earn working for a stranger, then your financial statements are meaningless because you're literally subsidizing the operations of the company with free labour.
You've indentured yourself to this venture.
If revenues are growing and you can afford to pay yourselves what a stranger would pay you for the work that you do and there is a profit left over after that, congratulations, you've got a real business.
Arrange a call if you'd like to discuss your case in particular. I've gone through this with many clients and helped them through the partnership issues that can normally arise from addressing it.
David C Barnett
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