a worker who is part of a profit-sharing plan would be happiest if her employer ______. This is a topic that many people are looking for. savegooglewave.com is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, savegooglewave.com would like to introduce to you How To Create A Company Profit Share. Following along are instructions in the video below:
Chandler bolt here and in this video. Im gonna talk to you about how how to create a company profit share. So really how you can get your employees buy into your business and kind of what youre doing long term.
So you can be way more profitable and also if youre anything like me youre in business. Because you care about people and youre in business. Because you care about making a difference.
So im just a firm believer in using profit share as a tool to not only teach people about business. But also to help people make a whole lot more money and everyone wins in my opinion. When you got a profit share set up at your company.
But can be kind of like a sticky thing and i know when i was researching how to set up a profit share. Theres not a lot of great information out there. And theres also a ton of ways that you can do it so im gonna break down kind of a few ways that you can do it and then ill dive into the specifics on how i do it at my company and this has been really really effective.
So first things first what like profit share versus equity. How do you make that decision. A lot of people especially.
So. I im based out of san francisco. Everyone here gives away equity right and especially as companies get bigger.
Now heres the thing equity is only valuable if youre planning to sell the company. Ok. So.
Unless. Youre gonna have a liquidity event or an. Exit equity is not valuable.
So a lot of times people are mostly attached to equity because theyre technically an owner so they feel like an owner. But it actually would be more advantageous for them to have a profit share. So ill give you an example in my business.
I do not plan to sell so a profit share is way more advantageous than equity now. Ive got another another video on why i dont believe in 50 50. Partnerships and really wanna.
You should be really careful with giving away equity. So this kind of definitely factors into that but equity oftentimes is not dividend paying so you know sometimes if youre you have 5 equity in a business like youre only going to get that. 5.
If and win the business sales so sometimes if you have 5 equity in a business. Youre only going to see a return on that if and when that business sells so thats why im a firm believer in a profit share and using that as a mechanism to really motivate your employees. But also help them buy in and feel like owners at your company.
So let me walk you through how i set this up so i kind of evaluated a bunch of different options you can have you know something thats based on tenure and the company. How long have they been there and then theres this weighted percentage. Theres also other ways to do it based on position based on you know are they on the ops team or the marketing team or something else based on you know.
This is like all these ways to do it. And i broke down a bunch of different ones. Because i wanted to have something that was really easy to understand.
Its by far the most important thing to me is if the people dont understand. It is not gonna mean anything so. While i wanted to factor for things like oh.
Heres someone a key person. Thats been with me for longer so i want them to make more or you know i wanted to just kind of figure out all these ways that i can do weighted averages and all that stuff i decided against almost all of that and i made it very very simple so heres how it works we take 5 of profits now. Ive heard of people going up to 10.
My company is highly profitable. So its a very lucrative lucrative profit share with only 5 of profits and i say only i think thats actually very generous. So we got 5 of profits and then the what happens is so we take that 5 of profits and then we divide it amongst full time non commissioned roles and proportion to the salary that they make in the company.
Now. I know that probably sounds super confusing. So ill break this down for you so first things first.
If you if youre in a commission based role so if youre in sales or any other part of the company where you get a commission. Then youre not in the profit share. Now.
The reason being you got something better than the profit share. You got a commission structure right so if youre in sales you get paid directly for the sales that you bring in so thats great so youre not in the profit share. So the profit share is only for full time employees.
Now. Why do i do that because at self publishing school. I want people to be all in right.
And so i want it to really be a privilege to be a part of the profit share and also be privileged this only reserved for people who are all in right and some people want to do part time thats totally cool. Im fine with that but they just wont be a part of the profit share right and so this really helps you know when it comes to not only convincing. Im gonna go full time.
But if also if someones you know wants to go part time they just know point blank that theyre gonna be out of the profits here right so its only four full time employees. Its only four people who are all in with the company now one of the things that we do is we set kind of this time limit for when people can get into the profits here. So typically we wont allow someone in the profit share until theyve been with a company for a year.
So sometimes well make an exception and do six months if theyve just really knocked it out of the park in the first six months then well kind of make that exception. But heres the thing on behalf.
Now. We dont have a formal voting or anything set up like that but i ultimately make a lot of those decisions on who gets pulled into the profit share. And i have to make those decisions based on whats best for everyone whos in the crawfish share because the worst thing that they want is someone to come in the profit share thats gonna drag them down.
And thats not going to add more profit now on the flip side if they know that we hired someone really really good and theyre killing. It they want them to be in the profit share because all boats were rise right everyones gonna make a lot more money so we kind of make that decision its usually a year. But sometimes well shorten that down to six months.
Now how do we divide this out so basically what you have is lets say youve got your labor pool. Lets say its fifty thousand dollars for a month. Right now lets say me as an employee.
I make this high numbers. But well say ten thousand dollars per month. So i make essentially 20 of the labor pool.
Thats in the profit share. Okay so hopefully youre tracking me so far so i make twenty percent of the labor pool. And now weve got a five percent profit share.
So that means. Im gonna make twenty percent of the profit share. So youd multiply the profit share amount by my percentage of salary proportionate to the total number of salaries.
The dollar amount in the profit share. So basically what this does is this ensures that everyone gets paid out the profit share thats a percentage of their salary. So for example in one month.
You know the profit share might be thirty percent. So what that means is that everyone gets a 30 percent pay bump in that month. Okay so the reason i structured it this way is i wanted to make sure that ive got another video thats on it talks about employee vs owner compensation so talk about where you get paid a salary for what you do you get paid a dividend or a profit on what you own so basically the way that we structure.
Our salaries are is its a market based wage for the job that a person is doing so the more that your wage is the more that youre responsible oftentimes in the company. So i wanted the profit share to be reflective of a percentage of that salary. So it means the same amount to everyone right because then i might have if i didnt structure it that way and i just said equal across the board.
Then i might have people who make less money. Which really is a reflection of their adding less value to the company that may be someone who makes more money theyre getting an equal amount as someone whos busting it in their job to create more profit for the company as a whole. So i wanted everyone to feel it equally so its like oh everyone got a 30 pay bump or a 20 pay bump or whatever that might look like and so we all feel it we all celebrate and its kind of an equal terms proportionate to the amount of money that we make for our salary.
Now theres a couple other key things when youre structuring this so number one i pay this quarterly. I think this is really important i kind of went back and forth and i heard different people say monthly and quarterly. Some other people said yearly.
I think thats crazy i would never make people wait that long because i want them to see the fruits of their labor on a frequent basis. So well basically pay it fifteen days after the end of the quarter for that quarter and well announce what the percentage is now this this is gonna you know widely vary based on your company. And this has widely varied based on the profitability of the quarter.
That weve had but you know this is you know went anywhere from 10. So so we just came off a record quarter. We were it was a thirty five percent pay bump for everyone thats in the profit share right so its almost like they work for three months.
They got paid for four months. So its really cool and people get really fired up about that and guess what they know the numbers they understand the numbers and they know what we need to do next quarter to go even higher than that now one of the last things ill mention on forming a profit share. And this is one of the mistakes.
I see people make is they factor it into the compensation on how they pay people. I think this is really dumb. If youre gonna have a profit share.
It should be like i said earlier right you get paid a salary for what you do you get paid a dividend or a profit on what you own so as being part of the profit share. Youre essentially a part owner in the company. Because youre getting paid a percentage of the profits youre getting paid a dividend.
So why would i factor that into how much im paying you i should pay you a market based. Wage so lets say the market based wage for the position is 50000. Im gonna pay you the market based wage and in fact i would prefer to make sure im on the upper end of that wage because ive probably got a really talented person.
I want to make sure that they stay and then the profit share is in addition to that this is really important because some people try to say oh ive got a profit share. So im just gonna pay them thirty five and assume that the profit share is going to shake out to be fifteen and so i pitched them that theyre gonna make fifty right that in my opinion is not the way to do it we always say and this is the expectation that i set when i rolled out the profits here is that as we would say in the south. The profit share is the gravy is not the main dish right so when youre structuring your finances as an employee.
Do not count on the profit share right pay your bills feed your family do all those things based off of your salary and the profits here is going to be bonus. Its gonna be extra money that when it comes thats great. But dont go ahead and pencil that off thats gonna be xyz and spin.
It because who knows as an owner. This is youre now part of an owner in the business bad times are gonna come theres gonna be rainy days theres gonna be winter and in those times. We might not make as much money and so if you factored for that in your bills.
And youre living above your means. And thats not going to be a very pleasant experience for you so thats the 10000. Foot view.
Thats how we created the profit share. Id love to hear from you your thoughts on this video. Hey do you have a profit share or not.
And why not or why do you have it comment below let me know that also is it structured similarly or different. What do you like about this bottle. What do you not like about this model comment below with your thoughts on the video.
And i look forward to seeing you in the next one see ya. .
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