Sick of instant ramen

Sick of instant ramen

When to start paying yourself

When to start paying yourself


Season 1 | Episode 1

From living off savings and instant ramen, to carving a minimal salary out of the company budget, we meet five entrepreneurs and get their sound advice on the delicate matter of paying yourself as a new business founder.  

With insights into the inner workings of their companies, we talk about sweat equity, the risk of paying by plastic, and the ephemeral joy that comes from hardship and deprivation in the strive for success.  

So when exactly should you cut yourself your first paycheck?

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You can’t live on ramen alone – the tricky business of paying yourself

Prosperity comes at a price. It’s a truism as old as entrepreneurship itself and to many, a spell of living on a diet of instant noodles is an essential stage in the path to success. But you can’t follow your dream without also balancing out the everyday realities of shelter, health and real food: not paying yourself simply isn’t a realistic option.

The question is, how do you do it? We spoke to a diverse range of small businesses owners about this particular juggling act, and some of the creative ways they’ve kept the balls in the air.


Now or next week?

The ‘When?’ is the first major decision to make and David Patrick, founder of skateboard wheel manufacturer Shark Wheel is blunt. “Immediately. From the very first dollars I take from an investor there's money that has to go out to me. It’s not huge money, but there was an amount that I always had to have from the company to live on.”

Dana Donofree – founder of AnaOno, a business supplying lingerie for women who have had breast cancer – agrees. “It doesn't have to be a lot. $500, or $1000 – you need to really ensure your living expenses should be carved out as soon as it possibly can.” Dana learned this the hard way. “There was a 12 month lull of where I really was running on fumes to keep my bills paid. I was living on a reserve from my old job, and I had a plan that in three years I would pay myself. And, here I am at year four and I am just now figuring out how to.”

David adds that product pricing has a direct bearing on being able to pay yourself, with the 4x multiplier being the magic number. “If the first dollar went to cost of goods, the second dollar went to growing the inventory. The third dollar went to all of the other expenses and the fourth dollar goes to me. There is enough profit in there for me to pull money.”


Sweat equity

But how much is enough? Dana says “You might get paid half of what you are paying your top employee. That's part of building your salaries into your business plan.” In a tough month, the founder might be the last one to get paid, if at all – something that’s unsustainable in the long term. “You can't run a business if you can't pay your rent. It doesn't help if you lose your car and you lose your house and you can't buy groceries.”

Aqila Augusta, founder of Memphis hair product firm Edge Entity, also shared the opinion… to a point. “I pay myself a really fair amount, just like my employees. But even though I'm working around the clock, 24/7, I don't increase my wage.”

David takes a different view. “Sweat equals risk in my world – sweat money is worth more than real money. If you pay me real money, I want $50k; If you pay me sweat money, I want $75k. I didn't get the benefit and use of that money, and I was taking a risk. If you didn't go in with me on the sweat money, don't expect shares. You got paid, you had no risk.”

The entrepreneurs


Dana Donofree


David Patrick


Aqila Augusta


Jeanne Foley & Diana Ganz

Creative finances

The mechanics of finance can be every bit as divisive. It’s something that Aqila has discussed with other small business owners. “They prefer that you do a draw where you just draw money out of your account, your business account, and you pay taxes on it later. I like to pay my taxes upfront.” This strategic approach also means that Aqila isn’t hit with a big tax bill from the IRS at the end of the year.

On the flipside, Diana and Jeanne, founders of SuitShop (formerly The Groomsman Suit) – a company based out of Chicago that designs and sells affordable suits and tuxedos for weddings – went down the perilous credit card route at the outset.

“Credit cards with 0% interest for 24 months, cash advance cards… we each opened three cards. We were so confident that when those balances were due, we would be fine.” It meant that they were able to delay paying themselves, something that they viewed as a vital aspect of getting off the ground. “We weren't shoveling our own personal cash at these things and then waiting for the dust to settle and see who needed to be paid back.”

Whilst they acknowledge that it was a risky move (“I don't know that we would give that advice to someone starting a business…”), it’s clear that they were no strangers to financial creativity. “I had a car at the time… and the company needed a car because we were driving all over. So we sold that to the company.”


Adjustments and rewards

Even once a business has got past the point where the founders are no longer penniless, those hard-won rewards still come with the need to make lifestyle adjustments.

“A lot of people start seeing a little bit of money and then they start splurging and taking trips…”

“I can't afford a $5 coffee every day anymore. But I can still make coffee at my house,” says Dana. But the impact on her time is also considerable. “I don't have any time to spend any money. All I really need to do is put gas in my car, feed myself and pay my mortgage. Maybe I used to eat out five nights a week; now maybe you eat out once a week. You have to scale everything back and adjust to a new lifestyle.”

Aqila is realistic about the payoffs too. “A lot of people start seeing a little bit of money and then they start splurging and taking trips… and you know, it's like, no! you’re still broke. Your business is still broke. You can't do this stuff!

“In the beginning, I was so stingy with myself. I remember I wanted to buy this Chanel bag – I said, okay, so if I can get my personal and my business accounts to $50,000 each, then I deserve it. And once I got to $50,000 I say, you know what… if I buy a Chanel bag for $5,000 now, my account will be down to $45,000; now I gotta get it to $55,000…”

For many, work really is its own reward. “I feel rewarded when we win big,” says Dana. “I feel rewarded when we get a new client, or a new customer or a new opportunity. And because my business is my life now, that is my reward.”


Fun or fear?

That enjoyment is a key component to what keeps many entrepreneurs working long hours for (seemingly) little reward. For Diana and Jeanne, their own definition of a reward would be starting another business. “We probably would be fine if we didn't even pay ourselves right now, because we're just having so much fun. I mean for the first year we didn't really earn a dime and we couldn't have been happier.”

There’s no escaping the fact that those dimes are important, though. “I would say to anyone looking to start a business, it’s really important a few years in advance to live as simply as you can. It makes it so much easier to take a risk that could be life-changing…”

“Once I had the first company,” says David, “I immediately paid myself enough to pay the rent and the ramen so that I could be there every day. It's always your passion, it's always your thing. You’re having so much fun building it, that you're staying all night and you're sleeping at the office. Spending money on superfluous things doesn’t happen. That's why the ramen is always okay at those points because you just wanted something fast anyway. Can you tell I like the ramen?”

He’s quick to balance the joy with the fear. ”You don't know if it's going to succeed or not. All you feel is this horrifying fire in your belly to get it done. And there isn't time to sit back and smell the roses and take it all in. You had $10K – you spent eight on computers, and two on the first month's rent, and you need to start turning cash.

“Again if I say that it's full time, you gotta have enough coming out for yourself. There's no such thing as sweat equitying your way through bankruptcy and foreclosure and homelessness.”

Listen to the episode

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