I'm starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the seventeenth installment. You may find my efforts instructive. Or you may know a better way--if so, please let me know!
When you start a business you put a lot of yourself into it: time, ideas, and, of course, money for things like servers, supplies, and people.
In addition to whatever money you put into the business, you also are spending money just living. Starting a business is not for the fearful. Quitting a job and convincing your family to sacrifice for months or even years while you pursue a venture takes real faith. You might think you can get by without much personal sacrifice, but you can't. That's just not realistic.
When Steve and I started Kynetx, we sold our plane to fund the business. We also realized that we'd be living off our second mortgages for a while. Frankly I've been surprised at how low I have been able to get our burn rate and how long the money has stretched. Good thing too since I've also been surprised how long it's taken to get funding!
Sooner or later, however, most founders will need to start getting some money out of the business in the form of a salary. That is a magical moment. For me at Kynetx it happened yesterday. I can't properly describe the emotions that ran through me as I held a small check representing the first bit of money that I hope is a permanent reversal of my personal cash flow as it relates to Kynetx.
Paying yourself is tricky business in a startup. Investors don't really want to put money into a company only to have the founders transfer it--even as a small salary--to their personal checking account. The best thing to do is to pay yourself out of sales and use investment dollars to grow the business. Besides, a "no sales, no pay for the founders" policy incents everyone toward the thing that has to happen to make the business work: make sales.