How much should bootstrappers pay themselves?
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Life is short.
Always take more off the table.
You never know what will happen.
Making $100k in salary at $1M ARR does seem low.
Based on my experience (and the folks DMing me) $100k founder salary at $1M, and $150k at $2M is very low for bootstrapped founders who are running profitable, lean SaaS companies.
👉 Many bootstrapped founders (solo and dual) seem to be taking 50% of ARR as founder compensation.
Why be a founder if your success doesn't translate into a better life?
I kinda have a problem with this question: "Why be a founder if your success doesn't translate into a better life?". The reason is: Earning more money doesn't mean having a better life.
By assuming that there is no necessity to be living at the same location as the full-time job's & not working the same amount of hours, I can gladly earn less as a founder to have the freedom of living and working from wherever I want, freedom of setting my own work hours and having more time to work on something else or to spend it the way I want.
For example, if being a successful founder leads to reducing your full-time 40-hour workweek into a 10-hour workweek while maintaining the same productivity level & earning the same amount of money, then more money doesn't translate into a better life.
Entrepreneurship is a huge risk (financially).
You're giving up some of the best years of your career to make a bet that might not work out.
The potential financial rewards should account for the risks you're taking.
It might take you 5, 10, 20 years to finally hit a business ideas that works. The payoffs you get should account for those "lost years."
Gaining freedom and flexibility with your time is a huge perk of entrepreneurship. But a strong financial base (with lots of margin) will form the foundation of the freedom and flexibility.
You want both! Freedom and the money to secure that freedom.
This is tricky. I think it depends on if you are building for the recurring or for the sell.
If you build for the recurring, meaning to have some recurring income over the long term (I think some people call this a lifestyle business), then I think paying yourself handsomely makes a ton of sense... otherwise, whats the point?
If you are building for the sell, the exit, or the big payoff at the end, it might make more sense to devote as much money as possible to making a more valuable business. IE you might want to take a smaller salary so you can devote those funds to the business.
Yup.
And... if you're "thinking in bets," which is the more likely scenario?
I think the more likely one is building for the recurring, so paying yourself handsomely. That statistically more likely, IMO.
This is roughly right for salary based on my research. Higher take-home means profit participation, even if it's structured as W2 in the US.
My thought exercise: if the "job" only pays 125k on average, how about hiring for it and going full-owner?
Take what you want, but also be tax efficient. Rules and options will vary country to country.
We, have for example, opted to put a bunch of money into our pension because it's it's tax free.
Enough to pay the bills. - from a solo bootstrapped founder, me.