Forums: Discussions for entrepreneurs and small business.

When startups are invested in, is the money only for the business or can the business members utilize a slice of it as income?  Is there an industry norm to the amount or % start up members are allowed to count on as salary or income from the initial investment? 

My question is in regards to those who are starting a business when they already work for someone else.  It just seems that they would have more time to focus on the start up if the pressure to provide basic necessities were handled with some money from the VC or Angel. 

 JW

GOOD  question me to I woold like to no

I`m not going to pretend to be an expert on the details, but it`s my understanding that a salary is expected to be included in a business plan and, therefore, any funding requests. The way I was told, investors won`t take you seriously if you don`t include a salary for yourself and/or employees.

Regarding percentages and stuff, I am no help. But my information says that a legitimate salary request is expected, whatever "legitimate" means in your particular industry.

My business advisor gave me a pretty powerful pep talk about the importance of including yourself in on the investment. Without your skills and know-how, the business wouldn`t even exist. If you still have to work a full-time job, how on earth are you going to ever get your dream off the ground? Many times we feel shy or "humble" about asking for what we need, but that is a self-defeating attitude.

Thank you for your anwser

stephane

I definitely used my influx of capital to help support my income...

C.  


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Great info...hope to hear more and potential % to go by if possible.  Also, anyone know if their is a site which is similar to elance for vc or angel investing?  Thanks for the info thus far,

JW

In general, investors expect the participants (founders, additional employees, contractors, professional services) to be paid for their contributions. However, they would not want the founders and early employees to "get rich" on their investment dollars, therefore you should plan to pay a "living wage" to yourself and others - but not top dollar. If you`re making $50,000 in your full time job today - I wouldn`t plan to quit my job and get a salary of $100,000.

Another variable in the equation, is the stage of the business. If it`s at the "idea" stage, there are a number of things that can (and should) be done before you will need to "quit your day job" and devote full time to it. Your planning should identify the milestones to be accomplished before your full time is needed and exactly what your tasks and objectives will be when you (or any others) do become "full time" on the project.

Finally, keep in mind that - having accepted the capital, you should focus on using it to increase the value (valuation) of the company.

These are general answers. Each individual situation can and should have a specific solution.

I hope it helps.

Robert Johnson

Business Growth Masters, LLC

 

 

 

 

 

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