The Founder Finance Playbook: Pay Yourself Without Killing Runway

The Tradeoff Every Seed Founder Faces

You need to pay yourself enough to stay focused while keeping burn low enough to reach the next milestone. The goal is a simple salary and benefits setup that fits your startup runway math and does not create tax or compliance surprises.

What Must be True Before you Set a Salary

Use this short readiness scan so founder salary choices do not blindside the budget.

• Target runway in months and the exact headcount plan are written down
• A baseline founder salary that covers rent, food, and healthcare is agreed by cofounders
• Tax and payroll mechanics are clear for your entity type
• A single owner of the budget updates cash and burn monthly
• A fallback plan exists if revenue slips or a raise takes longer than expected

A Pay-Yourself Menu that Keeps Burn Predictable

Pick one path and write the rule into your operating doc. Keywords used naturally: founder salary, pay yourself startup, healthcare for founders, startup taxes basics.

1. Lean salary with automatic review
    Pay a fixed amount that covers essentials. Review every quarter against cash and milestones. Default raise is 0 unless milestones are met.
   
2. Milestone-triggered step ups
    Start at a lean salary. Increase only when revenue or funding clears a written threshold. Document the triggers to avoid ad hoc raises.
   
3. Split approach for two founders
    If personal needs differ, set different salaries and equalize with equity or a future bonus when cash allows. Keep the total founder payroll inside a fixed percent of burn.
   
4. Avoid distributions that complicate taxes
    For C-corps, use payroll for compensation. For LLCs or S-corps, understand reasonable compensation rules and self-employment tax before taking distributions. Get CPA input so startup taxes basics do not become a distraction.

Runway Math for Small Teams

Make burn visible and binary so decisions are faster.

• Monthly burn equals payroll plus non payroll costs
• Runway equals cash on hand divided by monthly burn
• Red line equals minimum months of runway you will not cross
• If actual runway drops below the red line, cut burn or raise immediately

Want everything in one place before you sign contracts or hire the next engineer? Model salary, hiring dates, and healthcare premiums in Nauma to see how changes move runway and funding dates.

Healthcare Without Drama

Pick a path, cost it, and schedule enrollment. Keywords used naturally: healthcare for founders.

• Marketplace plan via Healthcare.gov for most pre-Series A teams
• Spousal coverage if available and cheaper
• Small group plan when you reach stable headcount and want a single plan for recruiting
• HSA eligible plans can help if cash is tight and you want tax benefits on medical spending

A worked Example with Numbers

Two founders, one early hire, 18 months of target runway.

Line item	Monthly
Founder A salary	$6,500
Founder B salary	$4,500
Early engineer salary	$12,000
Payroll taxes and benefits	$3,000
Office, tools, infra	$6,000
Healthcare premiums total	$1,800
Monthly burn	$33,800
Cash on hand	$675,000

Runway

• $675,000 divided by $33,800 equals about 19.9 months
• Red line set at 12 months. If pipeline slips, cut non payroll by $3,000 and defer a hire to restore runway above 18 months.

Taxes and Entity Notes you Should not Ignore

• C-Corp founders should run compensation through payroll, with withholding and W-2s
• LLC and S-Corp founders need to understand reasonable compensation and self-employment tax before taking draws
• Track deductible health insurance premiums correctly or through the company plan when possible
• Keep clean records of equity grants and 83(b) elections if applicable

Mistakes that Quietly Shorten Runway

• Setting founder salary before agreeing on target runway
• Mixing distributions and payroll without understanding tax treatment
• Forgetting payroll taxes and benefits when scoping offers
• Letting scope creep add non payroll costs that do not move milestones
• Hiring before you have a 6-month cash buffer after the hire

Quick Answers Founders Ask in Month One

What is a reasonable founder salary at seed
Many teams start between $4,000 and $8,000 per founder per month in high cost cities, then step up only after funding or revenue milestones.

Should we pay bonuses instead of higher salary
Use bonuses only when tied to milestones and when cash allows. Keep recurring burn predictable.

When should we switch to a group health plan
When headcount stabilizes and you can negotiate better benefits at similar cost. Until then, Marketplace or spousal coverage is often simpler.

How often should we revisit salaries
Quarterly. Reconfirm runway and milestones, then adjust if both the plan and cash support it.

Can we back pay founders after a raise
Possible, but only if the board approves and the raise leaves at least 12 months of runway after the back pay.