Sign South Dakota Profit Sharing Agreement Template Fast

Sign profit sharing agreement template

hey Chandler bolt here and in this video I'm gonna talk to you about how to create a company profit share so really how you can get your employees to buy into your business and kind of what you're doing long term so you can be way more profitable and also if you're anything like me you're in business because you care about people and you're in business because you care about making a difference so I'm 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 there's not a lot of great information out there and there's also a ton of ways that you can do it so I'm gonna break down kind of a few ways that you can do it and then I'll 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 I'm based out of San Francisco everyone here gives away equity right and especially as companies get bigger now here's the thing equity is only valuable if you're planning to sell the company ok so unless you're gonna have a liquidity event or an exit equity is not valuable so a lot of times people are mostly attached to equity because they're technically an owner so they feel like an owner but it actually would be more advantageous for them to have a profit share so I'll give you an example in my business I do not plan to sell so a profit share is way more advantageous than equity now I've got another another video on why I don't 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 you're you have 5% equity in a business like you're only going to get that 5% if and win the business sales so sometimes if you have 5% equity in a business you're only going to see a return on that if and when that business sells so that's why I'm 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 that's based on tenure and the company how long have they been there and then there's this weighted percentage there's 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 it's by far the most important thing to me is if the people don't understand it is not gonna mean anything so while I wanted to factor for things like oh here's someone a key person that's 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 here's how it works we take 5% of profits now I've heard of people going up to 10% my company is highly profitable so it's a very lucrative lucrative profit share with only 5% of profits and I say only I think that's 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 I'll break this down for you so first things first if you if you're in a commission-based role so if you're in sales or any other part of the company where you get a commission then you're 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 you're in sales you get paid directly for the sales that you bring in so that's great so you're 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 that's totally cool I'm fine with that but they just won't be a part of the profit share right and so this really helps you know when it comes to not only convincing I'm gonna go full-time but if also if someone's you know wants to go part-time they just know point-blank that they're gonna be out of the profits here right so it's only four full-time employees it's 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 won't allow someone in the profit share until they've been with a company for a year so sometimes we'll make an exception and do six months if they've just really knocked it out of the park in the first six months then we'll kind of make that exception but here's the thing on behalf now we don't 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 what's best for everyone who's in the crawfish share because the worst thing that they want is someone to come in the profit share that's gonna drag them down and that's not going to add more profit now on the flip side if they know that we hired someone really really good and they're killing it they want them to be in the profit share because all boats were rise right everyone's gonna make a lot more money so we kind of make that decision it's usually a year but sometimes we'll shorten that down to six months now how do we divide this out so basically what you have is let's say you've got your labor pool let's say it's fifty thousand dollars for a month right now let's say me as an employee I make this high numbers but we'll say ten thousand dollars per month so I make essentially 20% of the labor pool that's in the profit share okay so hopefully you're tracking me so far so I make twenty percent of the labor pool and now we've got a five percent profit share so that means I'm gonna make twenty percent of the profit share so you'd 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 that's 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 I've got another video that's 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 it's a market based wage for the job that a person is doing so the more that your wage is the more that you're 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 didn't 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 they're getting an equal amount as someone who's busting it in their job to create more profit for the company as a whole so I wanted everyone to feel it equally so it's 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 it's kind of an equal terms proportionate to the amount of money that we make for our salary now there's a couple other key things when you're 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 that's 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 we'll basically pay it fifteen days after the end of the quarter for that quarter and we'll 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 we've 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 that's in the profit share right so it's almost like they work for three months they got paid for four months so it's 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 I'll 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 you're 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 you're essentially a part owner in the company because you're getting paid a percentage of the profits you're getting paid a dividend so why would I factor that into how much I'm paying you I should pay you a market based wage so let's say the market based wage for the position is $50,000 I'm gonna pay you the market based wage and in fact I would prefer to make sure I'm on the upper end of that wage because I've 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 I've got a profit share so I'm 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 they're 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 you're 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 it's gonna be extra money that when it comes that's great but don't go ahead and pencil that off that's gonna be XYZ and spin it because who knows as an owner this is you're now part of an owner in the business bad times are gonna come there's gonna be rainy days there's 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 you're living above your means and that's not going to be a very pleasant experience for you so that's the 10,000 foot view that's how we created the profit share I'd 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