How to Determine Compensation for Start-Up Business Founders

Salaries continue to rise for senior executives. Often top management receives compensation that is 50 to 100 times that of the workers on the front line. This may be the subject of much controversy, but one peculiar scenario is the salary of the executive founder. Calculating founder salary involves non-mathematical theories that don't always work in favor of the founder. Read on to learn how to determine a fair salary for a start-up's founders.

Instructions

Difficulty: Moderate

1. Find out where the company is located. Salaries, in general, are higher and lower in certain geographical areas. Conduct a regional analysis of salaries at Salary.com. The data on this site paints a clear picture of how location affects compensation.
2. Determine the size of the company. It stands to reason that the larger companies can pay more. Founders who have helped to create large amounts of revenue can expect to receive healthy compensation.
3. Evaluate how many times the company has sought and received financing. The acquisition of financing spells a big win for the founder. Each time this may have occurred in a particular company, it often increases the founder salary. This is different from revenue in that funds were not created in relation to operations. Instead, they are the result of strategic dealings between senior management and banks or venture capitalists.
4. Resolve that a founder's salary may not be as high as other members of senior management. Ironically, founders may have more equity in a company, but lack political power of a departure. While other managers always have the option, and may threaten, to leave, founders are left to guard their investment with a less glamorous price tag.