When I started LogoMix a few years ago, I was bootstrapping my startup. I didn't take a salary. Technically, then, I wasn't an employee -- even though I was working both on and in the business.
(While conventional wisdom says you should work on your business, not in it, bootstrapping startup founders have to do both.)
I didn't take a salary because I was literally starting the business from my kitchen table and using savings as seed money. Every dollar I spent went into building and growing the business; getting a paycheck would have meant diverting funds better used elsewhere. (That's also why starting a side hustle while keeping your full-time job and using short-term revenue and cash flow as investment fuel to help your business grow is a great way to launch a startup.)
That approach worked for me and can work for you, too. But still: Eventually, you'll want to start taking a paycheck.
But how do you determine when? And how much? Great questions. Let's answer them.
1. Balance Needs With Goals
No matter how deep you dive into the land of cost-cutting, expense-shaving, living on Ramen noodles, you'll still need some amount of money to live on. Maybe that comes from another job. Or from your savings. Whatever the source, I can't tell you how much you need.
Although I can recommend doing everything possible to cut your needs to the bone.
Just keep in mind that needs will affect your goals. If your goal is to make products that require a substantial investment in materials, equipment, etc., then while you may want to take a salary, you may not be able to afford to do so.
The key, especially early on, is to balance your needs with your business goals. In some cases, that might mean taking less or no salary; in other cases, that might mean postponing certain business purchases or plans for growth and expansion. Essentially, it all comes down to an allocation decision: where spending best benefits you and your business.
Because as an entrepreneur, you are your business.
2. Balance Employees With Yourself
If you're generating sufficient revenue to take a paycheck, you still might not want to. Companies can't just generate revenue, but must also grow in intrinsic value. (Which is why some startup founders never take a salary; they expect their financial return to come from an infusion of capital or some form of exit.)
That's not true for your employees, though. Their return for their labor is their salary and working at an exciting place on fun challenges, which means you may want to use some of the cash your business generates to pay a new employee's salary, and not your own.
That's why many startup founders, even though they rank much higher on the organizational chart, make less than some (or even all) of their employees. They've decided that spending more on employees, and less on themselves, is the right decision for their business.
Again, it's all about smart allocation: balancing what you'll need to pay for the skills your business needs -- and your goals for your business -- against your need to draw a paycheck.
3. Balance Your Ego Against Your Goals
Here's the tough one. Say you were the VP of sales for a Fortune 500 company and left to start your business. In some ways, your title and your salary helped define you. (While titles and money aren't everything, they are a way of keeping score.)
To your surprise, within months your startup starts generating significant revenue. So much so that you can even "afford" to pay yourself a salary similar to that of your old job. Not only will the money be nice, it will also feel nice.
But, ultimately, that validation is irrelevant. The only small-business scoreboard that matters is the bottom line. The only validation you truly need comes from building a business that serves its customers, serves its employees, and is set up to do so for years to come.
Which will never happen if you start cashing those "ego" paychecks.
Balance your needs with your goals, and then think long term: infrastructure. Benefits. Marketing. Team building. Training and development.
Instead of comparing your current job with your old job, compare your current company with your old company -- and determine the ways your company needs to grow to be just as successful.
Do that, and you won't have to worry about your ego. You'll already feel incredibly good about yourself, and for all the right reasons.