27 Jan Those Three Magic Letters: CEO
Remember when you first thought of starting your own company? Goodbye to those mean old colleagues, hello to your name followed by those three magic letters: CEO.
But leaving a comfortable corporate position is no walk in the park. Half of all businesses don’t survive their first three years. And even if yours does, it could still be a long time before you can start paying yourself the salary you deserve.
But if you’re already a CEO like me – how do you calculate your salary? And how much should you pay your employees?
The first thing to remember is that your mindset around salary should be a lot different than it was back when you were working for someone else. At your corporate job your primary focus was on yourself: how do I make my salary grow with bonuses, percentage from sales, and other accomplishments and incentives?
However when you’re the one holding the reins your focus needs to shift to your team and your assets.
Setting Employee Salaries
A good leader recognizes that, if you hire the best talent you can afford, then your business is going to grow that much faster. Take care of your employees and they will take care of you. This is especially important now, during the pandemic.
You already know that spending too much on your own salary could mean not having enough money for your business in the future. But as you look for cost-saving measures you may still be tempted to lay off employees while keeping your own salary untouched. Don’t do it.
Postpone laying off staff as late as you can. Cut salaries instead – including yours. The trusted employee you let go today will not come back tomorrow knowing that you fired them once to save costs. In fact, in times of crisis many founders I know stopped paying themselves salaries in order to keep their most important team members on the payroll.
The results are clear: loyalty pays. These companies are now on the rise, in large part thanks to being able to attract and retain the best talent.
Paying Yourself as a CEO
So how do you set your own salary? Even in the best of times, I set my salary as a CEO just high enough to get by without struggling to make ends meet.
Before deciding on a number I go through all my expenses and analyze my fixed monthly costs. I remove all unnecessary spending at a large scale, but I also go through my credit card bills, analyze those and remove even the smallest expenses for things I don’t really need.
I put together all my fixed costs (rents, mortgages, insurances, groceries, etc) and think about how I can lower this amount (sub-rent part of my space, pick a cheaper insurer, shop online to avoid impulse buys, etc).
Knowing Your Expenditures and Revisiting Your Salary
You are the CEO. You have sole responsibility for all incoming revenues and all cash paid out. Your fiscal health is the company’s fiscal health. Balancing costs and expenditures while caring for your most important assets is what leads to success. And don’t just look at salary once a year. I’ve revisited my salary every three months or so since I started my company Nanos.ai – allowing me to make dynamic decisions about salaries and expenditures.
Being CEO is a difficult job that deserves to be richly compensated. But with care and awareness, you can be paid fairly while also caring for your team and ultimately growing your business.