Two Stupid Reasons Why Entrepreneurs Underpay Themselves

Filed in archive Entrepreneurship on October 19, 2006

In an article at Canadian Business a survey by Noel Wasserman cites the fact that many founders of company are underpaid by as much as $30,000 per year and as few as 1 in 20 founders will have "built in a rate return for their pay" into their forecasts.

The founding partner of Crossford Consulting in Toronto says there are two stupid reasons why entrepreneurs underpay themselves.

First, he says, some entrepreneurs think they can use their own lousy compensation as a Lever when negotiating subordinates' pay.

The other reason entrepreneurs underpay themselves is bad budgeting, says Britton. Instead of factoring in an appropriate salary for themselves ahead of time, founders will wait and see how much money the business makes over the year, and draw from that. When he asks groups of entrepreneurs if they have built a rate of return for themselves into their forecasts, Britton says only about one person in 20 will raise their hand. Via Give yourself a raise

I am going to have to keep an eye on , some pretty interesting stuff.

What is your practice? Are you underpaid?