|
Small Business Resources
What are typical profit-sharing rates in a very small company? Is a range possible? For example, this much if the company profit is between $50,000 and $100,000, this much if it is between $100,000 and $150,000?
Hi Josee, Thanks for your question. It's great you are thinking about rewarding your team. Let me offer you a different take on Profit sharing that may, in some arenas, be bit controversial. There are a couple of reasons for offering Profit share. One is to implement a personal social ethic of simply sharing the wealth as part of a commitment to a triple bottom line philosophy. The second is to motivate your team to higher levels of loyalty and performance. If you are pursuing the first, there really are no guides beyond your own values. Some companies will simply share profits on a set percentage, some will first identify what the company needs to retain for its next year's operations and them split the remainder or a portion of the remainder among the team. The amount being apportioned can be split equally or it can be apportioned on the same ratios as each person's salary is to the overall salary. On the other hand, if you are trying to encourage behaviours that drive business success, simple profit share, in my experience, does not do the job. If the company experiences profit growth, a plain profit share rewards everyone regardless of their performance. Therefore, there is no incentive to alter behaviour. A clearer approach is to set aside a certain portion of profits as being available for distribution. However, they will not necessarily be fully distributed. Each individual will receive to the extent that they have met predetermined performance expectations. In doing so, you are saying that we will all share in our growth to the extent that we have contributed to it. So, let's say you set aside 25% of profits to be available for distribution and you use a proportion of salary allocation. Jim has a salary that is 10% of all company salaries. Therefore, if the company earned 100,000 in profits, there would be 25,000 available for distribution of which 2500 is on the table for Jim. However, if Jim only meets 60% of his performance expectation, his profit share would be 1500. With all of that, there really aren't set levels of proportions to allocate. It is a combination of how much you wish to share, how much you wish to retain, and what will achieve the level of motivation you require. Cheers, Warren
You have a question for our expert Warren Coughlin? You too can
ASK A QUESTION!
|
| Coupons Deals Expired Deals Features Freebies Forums Links Retailer Ratings Marketplace Canadian Price Comparison |
Copyright © 2000 -
RedFlagDeals.com, a division of Clear Sky Media, Inc. All rights reserved.
(Terms of Use, Privacy Policy)
