We have all been there. Sitting with some friends with a cold beverage in hands when a business idea strikes. You all agree this is the best, safe-proof idea ever and that you should definitely make it happen. But in most cases you don’t, and all is forgotten by the next morning.
Well, from time to time these friends feel a bit more entrepreneurial and actually have enough enthusiasm to try and build on it. And there you go, just like that, another startup is born.
Two ways to go
One of the first issues new co-founders are facing is distributing responsibilities and of course, setting salaries. These things can be decided in two ways: setting equal salaries for everyone or deciding inequity between partners.
The first choice seems fairer at first, especially when the amount of work needed to be done can be split equally. A good way to go for startups can be setting a minimal salary for everyone. Otherwise, there may be future discord especially if someone feels there is a disbalance in responsibilities and the amount of work.
So I believe the second option may be more adequate if fair terms can be struck.
Everyone’s piece of the pie
If you all agree it is best everyone has a different salary, the second problem peeks its head. How to split the pie? Let us say there are three main positions your startup needs to have- CEO, CTO, and COO.
You may think each one of these has some kind of pre-set you can opt for. There aren’t, and you shouldn’t.
It is best you all somehow come to an agreement and evaluate and weigh in each one’s “value”, as difficult as this may seem at first.
Are the years of experience a way to go?
Not necessarily. Years of experience do not equal successfulness. If one of you had a past of failed businesses, it can not be expected of them to take the lead in this one as well. And of course, the salary should meet their expected contribution, not the amount of years spent doing business.
As your startup grows and you find yourselves with some extra money, you may feel the need to raise your salaries. But it is best advised you do this last. Instead, use these resources to expand your business, implement new technologies or hire more people to further accelerate your growth.
This can also be important if you find your business struggling, as it can be demonstrative to the investors and stakeholders that you are running the business ethically and in line with yours, as well as the interests of the people backing you up.
You can see how these, at first sight trivial and simple things, are not so easy to sort out. And why the great majority of those “bullet-proof” business ideas you and your friends were planning vigorously last night are gone with the bonfire you were discussing them by. Everything requires careful planning and execution to survive in today’s competitive market. And this includes salaries as well.