If a venture capital fund invests in your project, you are at the ideal starting point for success as an entrepreneur. But there is one issue in this whole process, which may seem inconsequential and can instead become an annoying stone in the shoe: the salary of the entrepreneur.
The salary defines professionalism, but this must be porous, since it needs to be impregnated with certain variables: a correlation between the entrepreneur’s experience and training, age, the start-up sector, competition and market references.
Setting a single benchmark for all entrepreneurs is a mistake. In the first place, the salary should be different considering the start-up phase. And with another example, it is understood that the entrepreneur who comes from a large multinational with a substantial remuneration often would not be willing to undertake losing economic level.
The entrepreneur must feel comfortable with his salary, in order to facilitate the development of the company. At the same time, we investors must also ensure that relations continue to solidify through wages. Salary is a guarantee of trust and belief in the project. A quorum is essential for both parties.
The key to success comes from the balance of a hygienic and sustainable salary. The investor should not impose, but the entrepreneur must assume the risks involved in a salary of a certain magnitude in his company, because this same salary consumes resources and an optimal management is necessary to safeguard the investment. The entrepreneur must value the benefits that lower remuneration can bring, such as greater project development or more exhaustive control of costs or even less dilution of their participation in the future, which does not require additional investment as they have optimised cash outflow.
The entrepreneur is a wage earner as well as an investment partner, and as such, participates in the dividends. In an investment of which the entrepreneur is a partner, he should be the first to be aware that an overly high salary can be detrimental to the growth rate of the start-up. But on the other hand, other entrepreneurs are in favour of significantly increasing their salaries in order to empathize with the investor.
The entrepreneur can take on a more adjusted salary in the most embryonic phases, but always playing with the future: adjusting the salary as the business grows. Not build a salary based on expectations, sometimes hypothetical. In the embryonic phase, slaughter capacity can bring more value to the company. Faced with this Mediterranean mentality that rewards the capacity for sacrifice, we find the American ideal that defines the entrepreneur for what he earns.
If the entrepreneur intends to do business with his salary, he walks the wrong path. Behind the figure that builds the salary we can glimpse the real reason why someone makes the decision to become an entrepreneur. The ambition to become a successful entrepreneur is a totally legitimate objective, beyond the social mission that a start-up can carry out; but it is advisable for the entrepreneur to question whether the fact of having a good salary for him is a long or short-term objective. Waiving a market salary, or the difference between an entrepreneurial and market salary, can be considered a contribution in kind from which a greater percentage of the company is obtained, and to which value is contributed.
The entrepreneur needs a personal economic wellbeing, feel comfortable and fulfilled professionally with the salary assigned, otherwise, it could jeopardize the sustainability of the investment. Salary is not symbolic, it underpins stability, but not a goal per se.