Raising venture capital for a new business is an exciting stage for any entrepreneur. Often, it means the launch of your business is moments away. It’s essential to understand the importance of paying yourself, when you’ve managed to secure venture capital (VC).
Whether you have taken a salary prior to the VC entry or are doing it for the first time, it’s absolutely crucial to pay yourself a salary throughout the venture investment stint. It is the only way to guarantee yourself a monthly paycheck; this is important not only for your sustenance, but also for your long-term financial security.
It’s unlikely that you’ll find potential investors who aren’t in favor of paying yourself. On the contrary, venture capitalists usually understand the importance of injecting some cash into the business owners themselves, in order to ensure better productivity and morale. After all, when the entrepreneur is rewarded for their efforts, their productivity is sure to increase.
Moreover, paying yourself a salary lets the investors know that you are invested in the success of the venture. It’s a powerful message for potential investors that you are intent on succeeding, and that your words speak louder than your actions. This can bolster an investor’s confidence and make them more likely to invest in you and your business.
It is also worth noting that paying yourself is a tax-efficient way to manage funds. You won’t be taxed twice on the same revenue when you are paid a salary, but any profits you make on investment returns elsewhere may be taxed. Therefore, it is typically wiser to pay yourself a salary than to invest in other ventures.
At the end of the day, if you’ve raised venture capital, you have to pay yourself. This will not only help keep you and your employees financially secure, it will also help bring stability, confidence, and motivation to your path towards success. Payroll management may be time-consuming and require extra paperwork, but in the end, it is essential for any business, and even more for any venture that has taken on capital investments.
