Step 16: Founder's Role and Salary
Whenever a start-up company fails to meet expectations, the leader is the first one to walk out. Even those who are fortunate enough to gain early user grip still face the fight of finding out cost effective ways to adopt users at scale and if they do succeed, then start-up organizations are most of the times lured to hire a ‘next level marketer’ to replace them.
A successful leader of a start-up firm must be unshaken by these risks and should believe they have what it takes for them to succeed and this is exactly how your role as a founder should be. Founders should be in a CEO’s role whenever and wherever possible so that when they take on the role of a CEO, the chances of success are high. Let us see how.
A CEO defines the culture for a firm, thus, as a founder you should define vision for your start-up company. Culture is something which is not taught but is learned while working. It is how you treat people, salaries, debates, work ethics, challenging ideas, hierarchy etc. that determine an organizations culture.
A CEO defines the vision for an organization, thus, as a founder; you should define the vision for your start-up firm and this mainly includes the product vision and what markets the organization should be in and when. This vision will define your place in the market and your competitive advantages as well as it will define your competition. This instinct is very important for becoming a successful founder.
A CEO also plays an important role in raising capital thus this is also an important role a founder should play. Questions like, when to raise capital, how much you should raise and at what price should you do that, are important questions that as a founder you should decide if you are in the CEO’s seat. Communicating a vision and a strategy for the organizations business and product to the investors are the key to raising capital. Raising capital however is also about personal chemistry and an emotional connection between the investor and the founders and this is why the founders should be involved in raising funds and get to know their investor.
The decision of when and how to exit an organization, mostly rests with a founder, but if the founder is also the CEO, then it gets way better. This decision is actually based on the data that no one but the founding team or the CEO have an access to. They are the people who are in ditches and they know when it is the time to sell and they also know when the price is apt. The decision to exit should be actually based on reality in the market rather than calculating a formula and the truth is that the market reality is not very well known to the board and investors at a core central level. Good investors will always permit the founders to take the call about selling the firm at a particular price.
Motivating the team and helping the business scale is one of the most common reasons that CEOs today are replacing founders. If a founder, at the right time, can employ the right individuals to run marketing, sales and operations, just like a COO and assign operations to another individual who understands and knows how to take the business up notch, then they can carry on carrying their role of focus on vision and organizations culture.
There will always be exceptions, in the end. There are a lot of excellent successful firms which have been built with CEO’s from outside.
When it comes to salary, often the top management receives compensation which is about 50 to 100 times that of the workers on the front line. This is a controversial subject no doubt, but one special case is deciding your salary as a founder. Calculating your salary as a founder requires non-mathematical theories that will not always work in founders favour.
Let us see how to determine a fair salary for you as a founder:
- You need to see and keep in mind the location of the organization. In general, the compensation is higher and lower in specific geographical regions. There are many websites available on the internet today where you can conduct a regional analysis of salaries in your area or region. The data on these websites will give you a proper idea and a picture of how location or geography has its affect on salaries.
- You should find out about the size of the organization. There are different reasons that the bigger firms can afford to pay more, thus the founders who have assisted in creating huge amounts of revenue could expect to get a healthy compensation.
- You can evaluate the times and situation when the firm has tried and obtained financing. The acquisition of financing means a win for the founder. Every time this might have occurred in any organization, it generally hikes the salary of the founder. It is different from revenue as funds were not made in relation to operations. Rather, they are the outcome of strategic dealings between senior management and venture capitalists or banks.
- Conclude that as a founder, your salary may not be as high as other individuals in senior management, but the irony is that the founders might have more equity in a firm, but miss the political power of a exiting. While other managers always have that option with them and they may even threaten to leave, but as a founder, you are left to defend their investment with a less alluring price label.
A business start-up is a parturition process, where you invest your experience, talent, time heart and soul into giving life to an idea. You develop it into a concept, then test and try it out and make a dedication to yourself and around you and take the next important step. This is when you actually form an organization to enclose it around the concept thereby making a new entity, i.e. the business. Many start-up businesses that fail, happens as they do not really understand or plan the financial responsibilities they are going to face in the future.