At an Owner Manager program that i recently signed up for, i was asked to fill a questionnaire on "value creation" from the perspective of different stakeholders in a business. "In this business - "what is important to me?", "what is important to an employee?", "what is important to a customer?", and "what is important to an investor?", were some of the questions asked.
Do note the distinction between "me" and an "me as an investor". It is clear that all entrepreneurs are investors in their own business. Apart from their time, effort, nearly all entrepreneurs invest money. This infusion may be direct through way of paid-up capital or loans from family and friends, or they could be investing money indirectly by way of taking lower-than-market-salaries for themselves - thus choosing to invest the profits back into the company.
I've done this for 10 years in my business. The salary i have withdrawn has been several times lower than what i have withdrawn at different points during my entrepreneurial journey so far. I still remember my last salary while i worked at some IT firms was nearly Rs.30,000/- as a Java Team Lead, way back in end-2001. When i started up Srijan, i withdrew Rs.5000/- for almost a year, covering some minor expenses and the fuel for my bike. Ofcourse, my family became investors in my business, by not charging for sharing their office space in Nehru Place, my covering my electricity and telephone expenses, and so on. To date, i am able to stay an entrepreneur, earning about 3 times lesser than the market pays my peers, because my wife works. She is thus an investor in my business in some way as well. In that sense, employees who stick along with the business, in spite of knowing that they can get better salaries elsewhere, become investors in the business. It takes a business coach, or a training program like the one i am in, or sometimes - as in my case - retirement planning, to make one cognizant of these perspectives. How easy is it to forget responsibilities towards yourself and your own family pursuing a wild dream of creating something special - something that it so deeply important to you as an entrepreneur.
Yet, i am absolutely certain, that even for conscientious (and absurd) entrepreneurs like me, it is not difficult to withdraw a higher salary. It may not be a market salary, but the differential factor could be far less. Insecurity about winning new business, the responsibility (and if may say, "burden") of continued employability of employees, the deep sense of responsibility for their families, and the overall pursuit of success of the business, may be reasons for one to forsake a better salary for oneself. However, this set of entrepreneurs fail to think of themselves as "investors". Any investor in any business would look for getting an 'x' times return on the investment made. And this must remain true for all entrepreneurs. Besides, entrepreneurs get old too. And they will have themselves and a family to take care of. Any retirement planning requires a recurring source of income now, even if you're one of those who have a business ready to get acquired and give you a ton of money in return. Do your retirement planning early, anyway. The earlier the better. I've learnt it the hard way. You do not have to.
So, if you've been like me so far - in your mid-thirties, still have the fire in your belly to go on in your business, a working wife who shares the cost of running the home - go ahead and give yourself a much deserved out-of-turn salary raise now!
Rahul Dewan is the CEO of Srijan Technologies, a successful open source web consulting and services business. He's been an entrepreneur for nearly 12 of his nearly 15 working years. He is part of a few more ventures including a unit of Srijan Technologies in Dharamshala, Himachal Pradesh, formed as a "co-operative of businesses", and a Digital Marketing firm called "Niswey". He runs a personal blog at: http://danceofshiva.wordpress.com, where he writes on "life" - religion, spirituality, politics, poverty, inspiring people, and almost every day to day thing that inspires or affects him in some way - profound or otherwise. Twitter: @rahuldewan.
written by Surajit Kayal, December 12, 2011