How can you ensure executive pay is competitive in a startup?

1 Understand the market

The first step to ensure your executive pay is competitive is to understand the market rate for your role, industry, and location. You can use online tools, such as Glassdoor, PayScale, or AngelList, to research the average salary, bonus, and equity ranges for similar positions in other startups. You can also network with other executives, mentors, or recruiters to get insights and feedback on the current trends and expectations in your field. Knowing the market rate will help you benchmark your compensation and negotiate with confidence.

2 Consider the stage and size of the startup

The second step to ensure your executive pay is competitive is to consider the stage and size of the startup you are joining or working for. Generally, the earlier and smaller the startup, the lower the cash salary and the higher the equity stake you can expect. This is because early-stage startups have less revenue and funding, and need to conserve cash and incentivize long-term commitment. As the startup grows and matures, the cash salary tends to increase and the equity stake tends to decrease, reflecting the lower risk and higher value of the company. Therefore, you should adjust your compensation expectations and demands according to the stage and size of the startup.

3 Balance cash and equity

The third step to ensure your executive pay is competitive is to balance cash and equity in your compensation package. Cash and equity are both important components of executive pay, but they have different implications and trade-offs. Cash salary provides immediate and stable income, but it is taxed as ordinary income and does not reflect the potential upside of the startup. Equity stake, such as stock options or restricted stock units, gives you ownership and alignment with the startup, but it is subject to vesting, dilution, and market fluctuations, and it may not be liquid or valuable until an exit event. Therefore, you should balance cash and equity in a way that meets your financial needs, risk tolerance, and growth potential.

4 Negotiate based on value and impact

The fourth step to ensure your executive pay is competitive is to negotiate based on value and impact. As an executive, you are expected to bring strategic vision, leadership skills, and operational excellence to the startup, and to drive its growth and success. Therefore, you should negotiate your compensation based on the value and impact you can create and demonstrate for the startup, rather than on your previous salary or your personal needs. You should highlight your achievements, skills, and contributions, and show how they align with the startup's goals, mission, and culture. You should also be prepared to back up your claims with evidence, such as metrics, testimonials, or references.

5 Be flexible and realistic

The fifth step to ensure your executive pay is competitive is to be flexible and realistic. Negotiating executive pay in a startup can be a complex and dynamic process, involving multiple factors, stakeholders, and scenarios. You should be flexible and open to different options and alternatives, such as deferred compensation, performance-based incentives, or non-monetary benefits. You should also be realistic and respectful of the startup's constraints and challenges, and avoid making unreasonable or unrealistic demands that could jeopardize your relationship or reputation. You should aim for a win-win outcome that reflects your value and supports the startup's growth.

6 Review and update regularly

The sixth and final step to ensure your executive pay is competitive is to review and update your compensation regularly. Executive pay in a startup is not a static or fixed agreement, but a dynamic and evolving one, that should reflect the changes and progress of the startup and your role. You should review your compensation at least once a year, or whenever there is a significant event, such as a funding round, a product launch, or a market shift. You should update your compensation based on the current market rate, the startup's performance and valuation, and your value and impact. You should also document and communicate any changes or adjustments clearly and transparently.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?