Your business is gaining traction and you’re attracting investors; now it’s time for you to scale up. The big question is when and how can you fairly pay yourself while also attracting top talent. There’s a lot to consider. Building a strategic compensation plan will help you prioritize these factors, set your business up for success – and make sure you get paid.
Early Cashflow and Tough Calls
In the early days of a start-up, you are busy securing funding to get your business up and running. In this stage, cashflow is precarious and operational costs are prioritized over compensation. As you wait on profits or additional investment, you might find yourself asking: who can we afford to pay? Who can be paid first? Should all partners be paid equally? Can we afford to hire the talent we need?
It’s important to note salaries (even your own) are operational costs and need to be part of your overall cashflow management approach. In the technology start-up world, your company’s competitive advantages often are ideas, innovation and skills – all of which are a direct result of having great talent. As a start-up, your challenge is balancing your operational costs, which as noted above, include salaries, with your business needs to achieve your strategic objectives and satisfy your investors.
Attracting and Retaining Top Talent
Knowing what a workforce will cost is just as important as obtaining estimates on supply costs. Technology entrepreneurs aren’t making widgets and don’t need to invest extensive capital to purchase inventory, machinery or physical assets to build a factory. Instead, they have to bring in the right talent to drive revenue and profit growth. They need intellectual capital: the right people with the right networks, creativity and innovation to drive growth and profits. The investment is now in human capital.
To manage costs and cashflow, many start-ups are looking beyond base salary to deliver total compensation packages that include non-cash elements like a balanced lifestyle, flexible work hours, generous vacation policies and a fun work environment. Delayed cash elements like equity or phantom-equity plans also provide start-ups with flexibility and insurance – only paying out if the company grows in value.
This approach is working for employees. More than ever, the work environment, company culture and a sense of contributing to something that is growing are powerful motivators for top talent to join a company. Innovation attracts innovation.
By creating a total compensation strategy, you can accurately capture the true cost of doing business, even if you actually delay paying yourself until cashflow is available. With this information, you can build a viable business plan and make better decisions to drive growth and profitability while paying everyone involved fairly and showing investors your business success is sustainable.
How MNP Can Help
We work with entrepreneurs from across a broad range of industries at all stages. We benchmark salary and benefits and help you design compensation systems that invest wisely – and fairly – in yourself and your hired talent. When you’re hitting your stride, we help with job design, performance management and building incentives. In a world where talent is your competitive advantage, let us help you optimize it.
Contact Jessica Steed, Senior Manager, Consulting Services, Organization and People, at 416.515.5065 or at firstname.lastname@example.org