My compensation framework (free):

I felt like I was in a bad scene from the Facebook movie.

“Not really,” I said. This guy had just raised a truckload of money from Andreessen or someone. His arrogance reeked.

“Pay yourself nothing, live on ramen, grind it out until you get funded.”

Yeah, no shit. We were already doing that. Problem was, getting real traction was taking years, not months.

I was sleeping on the floor of a one-room apartment because we couldn’t pay rent. Instead of Ramen, we lived off cheap Mexican (Rubio’s to be exact).

Growth was slow. It took years to hit even $100K in revenue.

Most would’ve quit. It was the logical thing to do. But like the cockroaches crawling around the Rubio’s floor, we just refused to die.

⁂

It took us six years (!!!) to reach $1M in revenue. That’s a lot of Mexican.

Eventually the traction came and revenue started flowing. But still, I hardly changed my salary. That was a big mistake.

I hear the same thing from founders I work with now. It’s hard to kick the Ramen mentality once it takes hold.

Don’t get me wrong, a little frugality is a good thing. But underpaying yourself for too long is a lose-lose for both you and the company. Stress piles up. You take your eye off the prize. Results suffer.

So now, when I talk to founders in Highland about comp, I give one piece of advice:

Ditch the ramen lifestyle as soon as possible!

“But how much do I pay myself then?”

“I don’t want my Board to think I’m being greedy.”

Understandable. I thought the same thing.

Eventually I did go to my Board though, and we created a framework that worked for both me and the company.

I call it win-win comp. And I’m sharing the whole framework with you today.

Win-win comp aligns incentives. And keeps the leader in the game over the long haul.

Here are the four components…

Total Earning Potential =

1. Base Salary: Starts modestly, but goes up automatically as your revenue grows.

2. Variable Comp: You earn this portion if the company hits its annual goals. Dollar amount is typically equal to the base salary.

3. Stretch Comp: These are CEO-specific stretch goals assigned by the Board, above and beyond company-wide goals. Dollar amount is typically 25-50% of the base salary.

4. Self Care Comp: A stipend for health and wellness related benefits, like a personal trainer, nutritionist or even a therapist. Treat yourself like a professional athlete.

Here’s an example of how the base salary component works:

Remember, this is a framework, not a prescription. Depending on your situation, these numbers might adjust a bit up or down.

Let’s assume you’ve got $1.5M in revenue. Your comp package might look something like this:

$100k base salary + $100k in variable comp + $25k in stretch comp + $15k in self-care comp = $240k in total earning potential

That’s for perfect performance. If you fail to produce results, your take-away comp would be much lower, reducing the risk for the company.

Get my full comp framework by clicking this button 👇

So what’d we learn? Ramen (or Mexican) might be necessary for a while as you build traction. But as soon as you reach product-market-fit and start to see some real revenue, you should upgrade your comp package.

The win-win comp framework aligns the leader and the company. You can even use it for the broader leadership or management team!

Till next time,

Never say die 🏴‍☠️

Scot

What changes when you raise money?

A few months ago, I got to sit down with Hiten Shah (founder at Nira, acquired by Dropbox in ‘24), for a private fireside chat with our Highland members.

Hiten finds himself talking founders OUT OF raising money from investors. At least for a while, until they can answer these three questions honestly👇

1. Are you willing to lose some control? Raise money = now you have a real boss.

2. Can you hit growth targets consistently? You need to go from founder, to proper operator, quickly.

3. Are you ready for transparent comms? Things like investor updates and performance reviews become the norm.

Great stuff, and so true, here’s the full clip from our conversation:

This conversation ties right into the win-win comp framework we discussed earlier. The company pays for performance, but protects its downside. If you kick ass, you get paid well. Your investors will love this comp structure. Pitch it them and let me know what they say. I’d be shocked if they turned you down.

If you’re a CEO or founder looking to scale your company, I’d encourage you to check out Highland – our “school” and community for high-growth leaders!

Here’s a link to book a call with my team and learn more about it: https://savvycal.com/fletcher/chat-with-highland-founder-community