Your Low Startup Salary Needs An Exit Plan 

One of my past co-founders and I lovingly called our “salary” a stipend because of how little of an amount it was. We were bright-eyed and bushy-tailed entrepreneurs who were driven by our passion for our startup’s mission. 

We cared so much about the work that we let salary talk take a back seat and allowed to receive as low of a pay check as we did. We never had a serious conversation about what compensation looked like for us in the next 5 years, specifically what the numbers were and how we were going to go about generating that money.

This is where we unknowingly declared the death of our startup, specifically through these three mistakes — 

We Prioritized Mission Over People

My co-founder and I didn’t know it at the time, but we dug our graves for our inevitable termination by putting our startup’s mission before ourselves. In the end, by not paying ourselves fairly, we made it impossible for either of us to work full-time (financially and mentally) on the business. 

Financial compensation is one of the few currencies we possess that feels like a fair exchange for our labor, expertise, and time. The more you substitute financial compensation for other currencies such as karma points and social praise, the less motivated you feel to bring 100% to work everyday. You can’t pay your rent or hang out with your friends at a bar with karma points — financial compensation is what we all need to keep our engines going for the long-term.

Because we prioritized mission over people, there was a natural exit that we had to take. Our debts and bills caught up to us and it was time to pay up.

Looking back, this was a dumb thing we did. How did we possibly think that 5 years of not paying ourselves fairly was going to result with any positive growth for the company? This was incredibly short-term thinking on our part. 

In order to be an awesome company, you need to act like one. Plan for excellence, play fairly, and think about your people. An awesome mission can’t be actualized without awesome-feeling people after all.

Changing your mentality around mission over people is also important for your startup’s team at large. You must pay your team fairly or you’ll lose every smart, irreplaceable person on your team.

A side note: You should run in the opposite direction of any startup that tells you that they’re looking for someone who prioritizes the company’s mission over their compensation. It’s a clear red flag — if a company can’t respect its people enough to compensate them fairly, it’s likely that they’re not going to be respectful in other areas of an employee’s work life.

Now, there’s a huge difference between this type of startup and a startup that simply doesn’t have the capital yet to offer fair compensation. In these scenarios, startups that don’t have the capital yet can still convey respect for their team members by for example, asking for only part-time work in exchange for low compensation.

There’s a clear distinction between a startup that doesn’t compensate their team fairly and then asks them to work 60-hour work weeks vs. startups that can’t compensate their team fairly but asks them to work part-time hours commensurate with their pay. There are plenty of other case-by-case scenarios where the exchange will seem fair and respectful, it’s on you to recognize these.

We Didn’t Make A Financial Plan For Our Salaries

Not creating a financial plan with milestones to help us both plan for our financial futures was a big mistake. We relied on the “we’ll pay ourselves when we have more money” plan, which didn’t bump our salaries in any significant way (surprise, surprise).

Assigning a number to your team’s salary needs in year 1, year 2, year 3, etc. are incredibly important. You set aside the money you name and prioritize — you cannot do this when your line item is “we’ll pay ourselves when we have more money”.

This approach is also not in your favor when you have numerous financial needs fighting for your attention. It’s highly likely that you’re going to spend any money that you do have on other financial needs first before setting some money aside for a dream fund. And since you don’t know what the team’s salary number is, you also aren’t able to set aside a tiny amount every week to slowly save towards it.

We Had No Plan, So There Was No Action

In Atomic Habits by James Clear, Clear points out that goal setting is not what separates those who succeed from those who fail. There are plenty of people who set goals for themselves and don’t achieve them. The people who succeed with goal setting are those that pair their goals with habits that they plan on exercising every day to help them achieve their goal.

My co-founder and I completely neglected the importance of calculated persistence — the pursuit of putting in a little work every day towards our goal so that it amounts to big changes by the end of the year. Success does not happen in an instant, it comes as a result of a consistent, persistent chipping away at our goals.

By putting our mission before our salaries and not naming a number to inform action, we were doomed to play small. Having a desire to pay ourselves fairly without a plan of attack all rode on hope and absolutely no reality. Hope didn’t get us anywhere, and it won’t get you anywhere either.

Don’t make the same mistakes we made. 

Crunch some numbers and make some calculations on what salary looks like for your whole team for the next 2–5 years. Once you have these numbers, make a weekly and monthly plan to achieve these numbers — what habits and tasks will you implement every week and month in order to achieve this increase in salaries? 

After this is decided, set it stone. Integrate it in your Asana/Trello boards, or print it out and plaster it on your walls. Remind yourself everyday of what you need to do and go after it.

For more startup support, grab my Pitch Deck Checklistor my ‘Find Your Customers’ worksheetto fine-tune your pitch deck or marketing strategy.

Sophia Sunwoo