How Ecommerce CEOs Actually Pay Themselves (Real Answers)

**Sean Frank** (0:00)
Welcome to the Operators Podcast. We're talking about money, how to get it, how to give it, how to spend it, how to wire the money to me directly. We're talking everything money today episode. We're going to be hiring CEOs, replacing yourself, all the type of stuff.
How much money isn't enough? We're going to cover all of that today. Thank you for listening to the Operators Podcast. We have Matt, Mike and myself, the three most handsome operators. Let's get into the episode.

**Matt Bertulli** (0:25)
ECF dropped their survey data on a whole bunch of brands that are in eCommerce Fuel. And it's all brand founders. And one of the things that was in there is there was this data around how much money and how do people pay themselves. And Sean, I know you've got a bit of a take on this. And I'd like to start off, I don't know if we've ever talked about this in great detail, but if you're a brand operator, how are you making money?
Is it salary? Is it distributions? Is it recaps? Is it like, is it only acquisition? Like maybe Sean, start us off. And then Mike, I really want to hear your thoughts on this, because I know you've done some interesting things at Simple Modern too, with how you guys think about like distributions and stuff. So Sean, take us away, man.
From your perspective, how the hell do people in e-commerce or consumer make money?

**Sean Frank** (1:15)
Well, I love e-commerce fuel. They do great events. They have a great forum active every single day with people who just talk about e-commerce. And because they have so many members, you know, hundreds or thousands at this point, they do really great annual surveys. And they put out this thing. I tweeted about it. It was about like, hey, small business owners, how are you actually getting paid? And we've all probably gone through this. Or if you're running a brand or not, you've probably gone through this. And they fall into different camps.
Some people are like, I'm only swinging for the fences. What that means is they put their salary to zero or like ramen wages and their goal is to be bought by somebody, private equity or whatever, and they're going to have one huge amazing payday, right? You know, I would put Zach Stuck in this bucket when he launched Mars Men. It's like he already had cash flow from previous businesses. He didn't take any money out of that business. He's like, I'm going to push this thing. And then he could get secondaries or distributions when there's actually some sort of transaction of that. Then there's a middle rung, which is take a normal, healthy salary, so $50, $75, $100, $150,000 a year, right? Basically, market rate are a little bit below market rate. And at the end of the year, you're going to have some amount of money left over. You're going to pay taxes, you're going to buy inventory, and then you're going to do a distribution for your profits. And then there's the just like, the bottom, like the lowest here is just like maximize cash flow out of this business every single day, right? There's people who are just, no matter how much money is in the bank account, they're taking 50 grand out, right?
So there's a lot of different ways to structure this. I think the middle path is where people, if you listen to the show, that's what you're going to be doing. You're going to have a salary, you're going to run your business as lean as possible, you're going to profit in the year, you're going to pay yourself out.

**Matt Bertulli** (2:54)
Mike, how have you guys done this at Simple Modern? Are you guys, do you, maybe you have multiple partners in the business. Does everybody take a salary? Are you guys largely distributions?
Is there a tax reason that you need to take a salary in the States? Like I know how the Canadian system works. I know a little bit about the US types of corps, but like maybe run us through your setup. No? Okay.

**Mike Beckham** (3:17)
Yeah, I don't think there's really a lot of incentive to take it as salary versus distributions. The way that the taxes work out if you're, unless you're a C Corp, it's kind of six in one hand, half dozen in the other. So the way that we started was early on, I took a very low salary, like 100 for a year and then 150 I mean, I say very low salary, very low relative probably to what CEOs earn in a lot of situations for the revenue level we were at.