Paying Market Rates Builds Viable Businesses
I discuss why underpaying key people can create a false economy inside a business, especially when future investors or buyers assess its true viability. The focus is on balancing fair remuneration with long-term equity value and commercial sustainability.
Key Takeaways
- Paying below market rate can make a business look stronger than it really is
- Future buyers or investors will factor in realistic replacement costs for key roles
- Fair, commercially viable pay supports a healthier and more sustainable organisation
Topics
- Business Strategy
- Leadership
- Startup Growth
- Company Culture
Transcript
And then actually, it's irresponsible not to be paying people the market rate, because you are then basically building into the fabric of the business a false economy, which if you are to ever sell this asset, someone very quickly is going to realise, well, if I need to replace that CEO, I need to 10x that salary, then this is no longer viable. So the business needs to, when it can, support a really commercially viable market rate infrastructure. I don't think you should milk the cow too much because there is this equity that one day might be worth something. But, you know, so long as you, I suppose the way I look at it is, so long as you can look yourself in the mirror and be like, like if this was just like public now, I'd be happy with this. I could justify this.