When founders stop paying themselves (and why it’s usually a bad sign)

In the early days of building a company, almost everything feels negotiable. Timelines slip, roles blur, and personal boundaries may soften. Founder pay is often among the first things to bend, then disappear altogether.

On the surface, the logic seems sound. If cash is tight, cutting your own salary may feel like a responsible move. It can seem like a show of loyalty, discipline, or alignment with the team. Some founders even treat it as a rite of passage or as proof of their full commitment. But, over time, this pattern can become less of a badge of honor and turn into more of a warning sign. 

In seed-stage startups, for example, founders typically earn between $40,000 to $75,000 annually, but some take no salary. Though most founders hold shares in the company they’re building, a payoff could be years away and it’s never guaranteed.

Understanding how to pay yourself as a startup founder impacts your personal income and much more. Your compensation decisions can reveal the health of the business, the clarity of your financial planning, and the sustainability of your leadership.

Founders rarely stop paying themselves on a whim. In most cases, the decision comes from a real pressure point. Those pressure points tend to arise when cash, expectations, and timing are misaligned, forcing founders to make rapid trade-offs based on imperfect information.

One common trigger is a cash crunch. Revenue may be uneven, burn may be higher than expected, or a fundraising round may take longer to close. Cutting founder pay can feel like the fastest way to extend runway without touching headcount or product investment.

There’s also a strong signaling component. Some founders reduce or eliminate their salary to demonstrate sacrifice, either to their team or investors. The message is often unspoken but clear: “I’m willing to suffer first.”

In other situations, the pressure is more explicit. Investors may push founders to show tighter cost discipline, especially in uncertain markets. Founder compensation becomes an easy line item to scrutinize because it feels discretionary, even when it’s not.

Taken together, these motivations are understandable. But they often lead founders to treat compensation as an emotional decision, instead of a strategic one.

Struggling with how to pay yourself as a startup founder is pretty common. Is adjusting founder pay always a problem? Not necessarily, but eliminating it entirely is often a reactive move that masks deeper issues. Reactive cuts tend to create new risks, rather than resolve the original ones.

Cutting founder pay is rarely part of a proactive financial plan. It tends to happen late, when options feel limited. By the time a founder stops paying themselves, the company is often already operating without sufficient visibility into burn, runway, or forward-looking cash needs.

More importantly, it can obscure the real problem. If the business can’t support even modest founder compensation, that may point to unsustainable burn, weak unit economics, or poor forecasting. Removing founder pay simply delays the moment when these underlying issues must be confronted.

There are also personal risks involved with cutting compensation. Running a company requires sustained focus and judgment. When a founder’s personal finances become unstable, decision-making suffers as stress compounds. The business may survive another quarter, but leadership quality could erode.

Finally, the signal this sends is often misread. Team members may interpret a cut to founder pay as a sign that the company is in trouble, even if leadership frames it as a well-meaning sacrifice. Boards may worry about founder burnout or long-term commitment. What was meant to demonstrate discipline can end up creating an atmosphere of uncertainty.

This is why questions like, “How much should founders pay themselves?” matter more than many entrepreneurs realize. Compensation is a valid cost and a strong indicator of whether you’re building your company based on realistic assumptions.

A healthier approach to this conversation starts by reframing founder pay as a deliberate choice, not an emergency lever. Remember, it’s not self-indulgent for a business owner to want or need payment for their time. 

At a baseline, founder compensation should be predictable, modest, and planned for alongside other fixed costs. It doesn’t need to match market rates, but it should be intentional. Paying yourself consistently enables accurate forecasting and clear communication with stakeholders. Plus, it can help you avoid having to make sudden, reactive cuts later.

This also means separating the image of personal sacrifice from financial strategy. If expense reduction is necessary, it should come from a broader review of how you manage burn, hiring plans, vendor costs, and revenue timelines, not just the founder’s paycheck.

When founders ask, “How much should I pay myself?,” the most useful answer is often layered with context. The right number depends on your company’s stage, location, and the company’s cash position, as well as your personal obligations. What matters more than the exact figure is that this amount is defensible, documented, and sustainable.

When the business is under pressure, there are options that preserve both runway and clarity. The key is to choose approaches that address the underlying financial challenge, rather than shifting all risk onto the founder’s personal finances.

Big-picture planning

One alternative is to renegotiate burn with visibility into your company’s full financial picture. Instead of zeroing in on founder pay, step back and model multiple scenarios. What happens if hiring slows? Or marketing spend shifts? What if revenue assumptions change? Founder compensation should be evaluated within that system, not isolated from it.

Milestone-based compensation

Another approach is milestone-based compensation. Founders can tie portions of their pay to specific, measurable outcomes, such as revenue thresholds, fundraising events, or product milestones, with clear timelines and expectations. This preserves accountability, without introducing ambiguity.

Formal compensation deferral 

In some cases, formal compensation deferral can make sense. The key word here is “formal.” Any deferral should be documented, time-bound, and, where applicable, approved by the board. Informal, open-ended arrangements tend to create confusion and resentment later.

Short-term capital

Short-term capital solutions and other alternative business financing options can also be worth exploring. Bridge financing, revenue-based financing, or other working capital tools may help the business to smooth cash flow. These options are not always right, but they’re often healthier than asking founders to personally absorb all the risk.

There are moments when intentionally and temporarily reducing founder pay is reasonable. If a reduction to the founder’s pay is part of a clear, time-bound plan with defined checkpoints, it can be a responsible move. The conditions for when to reinstate the pay should be an explicit part of this plan. Everyone involved, from founders to board members and key leaders, should understand the rationale and timeline. 

Transparency matters here. Cutting your own pay without explanation often creates more anxiety than clarity. Open communication helps prevent misinterpretation and keeps compensation decisions aligned with the broader strategy.

Just as important is personal runway planning. Founders should only reduce pay if doing so doesn’t create personal financial instability. Betting the company’s survival on a founder’s willingness to shoulder unlimited risk is rarely a sound strategy. In these cases, the question shifts from how much should a startup founder pay himself or herself to whether the decision supports both the business and the person leading it.

Learning how to pay yourself as a startup founder is ultimately about designing a business that works, not just one that survives. The healthiest companies treat founder compensation as one part of a broader financial system. Founder compensation should be planned, revisited as the company evolves, and reflect a realistic view of what it takes to build and lead a sustainable operation.

Stopping founder pay entirely is rarely a sign of strength. More often, it signals that the business lacks flexibility or planning discipline. By approaching compensation thoughtfully, founders send the signal that they’re serious about building companies that can support growth over the long haul.

Making confident decisions about founder pay requires clear, real-time visibility into your company’s cash flow and other financial nuances. Platforms like Mercury are designed to give founders that clarity, bringing banking and financial workflows into one place, so compensation decisions can be proactive rather than reactive.