Offering your employees and yourself the right salary
In this episode, Mattias explains how he determines the right salaries for his employees and for himself.
When setting a salary for an employee he takes several things into consideration. These are e.g. the market value and the experience of a person but also the location of his company. There are also resources online where you can find out the average salary for a specific position in your area.
When the research is done it's best to set a range of what you are willing to invest in the employee and also specifically ask them what salary they are expecting. From there on it's just a matter of negotiation.
Once someone is hired at iGoMoon they have the option to increase their salary as they grow and develop - they are able to climb up a ladder. Mattias also has a bonus system in place which can bridge the gap to the next raise. There are four things that determine if someone is eligible for a bonus:
1. Reaching the goal for the utilization rate
2. Reaching the team goal
3. Reaching the company goal (quarterly profit)
4. Keeping HubSpot and Google certification up to date
Determining your own salary as an entrepreneur
When it came to determining his own salary things got a bit trickier. On the one hand, you have the traditional salary you can pay out monthly. On the other hand, you have a dividend that you can pay out to the shareholders and yourself (usually annually). The latter however takes normally several years until you can take out any of the company's profit. Mattias actually did some calculations and came to the conclusion that he paid himself about 60.000 € in the first four years of building his business.
That's a salary of about 1250 € per month for four years in a row. He explains that salary by saying "the leader eats last". First, he made sure to pay everyone else, and then he took out money for himself. In the fourth year of being in business, he started to pay himself a salary of about 3500 € each month. In the last three years, he has been increasing his salary to 4900 €.
Mattias also gives good reasons why he is not taking out more salary for himself and why it's important to leave enough money in the company:
1. There are owners and founders who took a huge risk when starting the company- and they need to get paid.
2. Profit is crucial to generate further growth in the company.
3. Money needs to be saved for potential challenging times.
💡 EPISODE TAKE AWAY
Consider all relevant aspects when negotiating salaries.
How do you determine salaries?