Even if you’re just keeping yourself alive for the first few years as the founder of your start-up, sooner or later you’ll need to start paying yourself a salary.
New statistics have revealed Australians are leading the pack when it comes to founder salaries.
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Research by data collection and benchmarking group Compass has revealed the average start-up founder salary after surveying 11,160 start-ups.
Salaries varied considerably. Only 25% of Silicon Valley-based founders paid themselves more than $75,000 per year, with most (66%) paying themselves less than $50,000 per year.
On average, Australian founders who were paying themselves a set salary led the world, making an average of $72,363.
The data was shared with The Next Web which also explored the average salaries at different growth stages for companies and by level of investment.
Michael Todd, business advisor for the Small Biz Connect program run by the NSW government, said he was surprised by the high rate.
“This is just anecdotal, but I’d say almost half of new business owners don’t even pay themselves a set salary,” Todd says.
Todd told StartupSmart it’s important start-up businesses pay themselves a salary if they can.
“You need to build it into a business plan at the beginning, especially if you’re seeking investment because you need to know how much capital you’ll need,” Todd says. “Sometimes you’re just holding out, keeping an eye on the light at the end of the tunnel in maybe a few years, but start paying yourself something as soon as you can.”
According to Todd, paying yourself a set wage and factoring it into your business plan is especially important if you’re planning an acquisition exit.
“When you sell the business, that net profit has to include your salary so you need to incorporate it sooner or later,” Todd says. “You don’t want to paint a fake picture of the business to anyone. You need to get to the black of a business, and if you’re not paying yourself properly from the start that can be misleading.”