I talk frequently to hopeful entrepreneurs and groups about
a concept I call the “5 Deadly Sins of Entrepreneurism.” Many times these “sins”
get into an entrepreneurs mind and take over their thought process. At that
point hopeful business owners go from thinking about how to make their business
successful to thinking about being successful.
Many times this is a premature state and causes the business to stall or fail.
Sin #2 is Fortune. I saw an Inc. magazine article recently that suggested some rather startling
statistics about founder fortunes, at least in terms of founder pay in the
technology sector where the survey was conducted. I suspect that these
statistics are fairly common across the industry spectrum.
The survey measured how often the founder is the highest
paid executive in the firm. Here are the findings:
Highest Paid 17%
Tied 24%
Not Highest Paid 59%
To get really good people, who are typically employees not
entrepreneurs, you have to pay them well. There may not be enough cash flow
left over to pay yourself well. In fact, the survey found that in the 283 tech
companies surveyed, that the founder was paid less than at least one of their
subordinates in almost 60% of the companies. This situation has been
experienced by several of my business acquaintances who started businesses and
were in some cases the lowest paid employee during the start-up phase.
Now clearly this situation will change over time if the
start-up is successful. But it’s a cautionary tale for entrepreneurs to think
about their expectations for their start-up. You’ll likely not be super
successful over night. Time commitments, cash flow difficulties, and the like
take their toll on entrepreneurs who aren’t prepared for the lean start-up
times.
This discussion is never meant to scare people off, but to
prepare them for the reality of starting a business. If you and your family are
prepared for what’s coming, you’ll stand a better chance of surviving and
getting to the payoff time later.
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