How Much Should the CEO Pay Herself?
There’s a lot of stuff written on how much to pay yourself as CEO. Christoph Janz has a great spreadsheet of quantitative thoughts here.
Having thought a bunch about it, I think I can distill it down to 3 general guidelines:
- In the very early days, the CEO should be one of the worst paid. Until you have material revenues and/or funding, the CEO should ideally only take out the minimum she needs. If you are taking more out before $1m or $2m in ARR (or a large round) than you need to survive, something is off.
- Post-Initial Traction, and the hiring of a VP or Two — the CEO should probably be the 3d best paid. Hopefully, your VP of Sales is doing so well, she makes the most — not in base salary, but in salary + bonus. Then, hopefully, you’ve hired another Great VP that is so terrific she makes more than you, too. CEO as 3d is nice to see here. It’s the right stack ranking from say $1m to $10m in revenues, roughly.
- When money doesn’t matter so much, the CEO should be paid enough not to worry. This can be tough in high cost markets like SF, but after $10m in ARR or so, it doesn’t really matter. The last thing I want is the CEO stressed about paying rent, schools, etc. You want equity to be the main driver here, but once cash isn’t that important (the company is cash-flow positive or you’ve had a large raise and have many years of runway), the #1 use of that cash is to de-stress the CEO’s life.
Your gut probably already told you all of this already 🙂