If you’re a struggling entrepreneur or startup that’s been finding yourself forgoing on your own paycheck or even dipping into your savings to keep your business running… you may not be as alone as you think.
In a study done by an Atlanta-based, small business loan service provider, Kabbage, surveying over 500 business owners who had each been CEOs for at least ten and a half years, 51% of entrepreneurs reported that they skipped out on paying themselves for the first few months of business operation. Out of that 51%, 26% reported they went 2-6 months without cutting a paycheck for themselves, while 25% went even as long as 6 months and beyond.
It’s no secret that it’s hard work creating and maintaining a successful startup. For 63% of entrepreneurs, anxiety and stress over keeping up a steady cash flow in the business is a common worry – sometimes leading to a diminished sleep cycle and social life.
And yet, if we’re to learn anything from the startup greats, it’s that having a scrappy beginning doesn’t necessarily mean you won’t succeed – on the contrary, it builds character.
For the two co-founders of Lyft, the now $15 billion ride-sharing app, both John Zimmer and Logan Green didn’t issue themselves a paycheck throughout the first 3 years of operation.
“It was helpful that I saved some money,” Zimmer shared with Business Insider, during an episode of the podcast Success: How I Did It. “We basically lived in an apartment that was also our office. We called it the ‘apartifice.'”
But just because it keeps the lights on and may provide more cash flow stability, doesn’t mean you should necessarily forgo your salary.
Take Julia Collins, for example, Zume Pizza’s co-founder and once CFO to the Mexican and barbecue fusion restaurant, Mexicue. For two whole years, Collins avoided cutting a paycheck for herself, and the result was a serious case of burnout until she finally started giving herself the salary she deserved.
“The journey of being a founder is very taxing,” Collins summarized during January’s Black Women Raise Conference. “What I didn’t know is that when you raise money in rounds, it’s appropriate to take money from the table. You should negotiate a way to sell some of your equity in order to build yourself a cushion.”
The bottom line? Do what you need to do to feel secure in building your business, but don’t forget to take care of yourself too. If a little scrappy saving and paycheck skipping is required, then take comfort in the fact that you’re not the only one – just as long as you don’t stay stuck in that rut so long you run yourself, and your business, into the ground.
