Unlock the Power of Online Signature Licitness for Profit Sharing Agreements in United Kingdom

How to eSign a document: online signature licitness for Profit Sharing Agreement in United Kingdom

if you're like many business owners you've probably heard of profit sharing and you may have also wondered what the heck is it and why would i do it in my business uh this video is going to tell you a little bit about why it might be a good idea why it might actually increase your profit and some pitfalls too so how it can go terribly terribly wrong [Music] [Applause] hi i'm joe collins from avalon accounting so let's get into profit sharing what it is and how it can work for your business so profit sharing is popular with small businesses and large businesses and it's popular for a reason so i'm going to get into some of the benefits of what profit sharing can do for your business if done correctly so the benefits of profit sharing are that you're going to have engaged employees that really care about your business because you know in the end we care about ourselves so if they're going to see more profit gives them more money in their pocket they're going to do activities that hopefully you can help them with that are going to increase overall profitability and hopefully you get a win-win where both parties benefit from that sharing arrangement that's the goal on the flip side there can be some real downsides to profit sharing if done incorrectly and the big downside is that it can encourage bad behavior on behalf of your employees and one of the ways this can happen is if you incentivize your employees strictly on profit on profit then you can have scenarios where they're not working in the customer's best interest only in the short term profits best interest and can erode customer trust so that can hurt you in the long term for your profitability because you may lose customers or they may want to buy less from you so my personal journey with profit sharing was starting my business avalon about five years ago i wanted profit sharing to be really part of the dna of our business i wanted employees to feel really engaged with our profit and how we were being successful in our business and it really made me feel like i was taking care of employees as well that they really care about the the business and i cared about them so it was really a good way to make sure that got built into our culture and one of the books one of the most important books that i read at the time starting my business was the great game of business by jack stack and this informed my thinking on how to properly implement a profit sharing program and keep employees really engaged and one of the big takeaways from that book is that you do have to make it a game and we're humans we love games and we love to know the rules of the game so it's really important to make the rules really clear and secondly give people a stake in the outcome so if you win they have to win too that's part of the game of it so let's say profit sharing is for you you've decided that profit sharing is going to be a good part of your business and is going to help your employees be more engaged and increase your profit so the next stage of this is to really develop a program that's going to work for your business and i really encourage you at this point to spend a lot of time thinking about what the best structure is the number one thing and i mentioned it before is that you want to make the rules of this game very clear and it doesn't have to be strictly on profit that's where i think people maybe make some mistakes in this is that they think that okay i have profit i'm going to share it and that's the only kind of rule of that game but that's not necessarily the case so you may want to think about other numbers within your business that help support long-term profitability and that can be things like customer satisfaction employee satisfaction how happy are those people or maybe it's labor efficiency i mean it could be a number of things it could be many things but it doesn't have to be strictly profit so that's number one make sure the rules are really clear and they make sense to everybody number two is give people a stake in the outcome so yes profit sharing is a big part of that so if they meet all those goals they get some share of the profit that's number one but number two is recognition so if people are meeting those goals celebrate that in a you know a verbal way or put it out to everybody that they're doing a great job and that profit sharing is just a part of that that is the trophy but the celebrations are a big component of that as well so number three is that this is not a set it and forget it type of arrangement you need to be revisiting your profit sharing program on what's working and what's not and a key aspect of this is make sure you communicate that this is changing to your employees up front that this can change because if you change the rules in the middle of the game with employees not knowing that the rules might change you can face a lot of backlash so just make sure you're communicating that this is an open and changing arrangement and they'll be much happier when you do finally have to make some changes so number four is that although you've done all this work to structure it really well and communicate it really well with the employees you've built all that trust you may have to change your profit sharing program because it's not serving the company and it's not increasing profit maybe there's something you missed in that process or your company has just grown out of that that program so what's key here is that you're going to want to communicate this very tactfully to your employees so be prepared for that and the way to do this is to communicate it in such a way that it's a win-win for everybody that the company needs to make this change because it needs to continue to be profitable and if it's not profitable there will be no profit share and employees will really take that on and understand that this is to their benefit as well so now the part that you've probably been waiting for is how do you actually structure one of these programs and i'll go into some detail on how we've done it at avalon and how we've recently changed that based on our growing business so thinking back to when we first started profit sharing and and the early days of avalon was i wanted to make a simple program that everybody could understand and that was crystal clear so i went strictly profit at the time and that worked for a small business like like ours when we had very few employees we kind of outgrew that program so before it would have been if we have profit we share a third of that profit with employees equally but that sort of broke down as we as we grew and had more different types of employees with varying responsibilities so what i wanted to encourage when we switched this and we had done a lot of that work on how to structure it and communicating to employees what it all meant so we had a good trust base to move from but when we switched it we added some components to it so senior staff members have to make sure that employees are happy so we've added a component for employee satisfaction they need to make sure that employees are feeling engaged and happy in their work and number two customer satisfaction and that's a really important component for long-term viability is if we're dipping down from a customer satisfaction standpoint we're putting our future profit at risk so those were two components that were added to our profit sharing program and then the third is profit so we need to make a certain threshold i think early on one of my mistakes in the way i structured our profit sharing program was to share any profit that we had i think owners deserve a certain return on their investment and encouraging a really high caliber business is about encouraging really high caliber profitability and so we've changed that to include a higher level of profit that is shared but the upside to that it can be a lot higher for employees if we reach those high levels so something that we developed over time and really put a lot of thought into was how to structure this so that we one yes share with employees but two make sure that we're successful long term as well so i hope that example gave you some idea of how to structure these but every business is going to be a little bit different so think about what the critical numbers are in your business and who's responsible for them so you may have different incentive programs for different departments that are maybe more focused on efficiency or developing leads or closing sales there can be lots of things that come into this figure out what the numbers you need to reach are to be successful long term and have profit as a component to it but it can vary within every business so just it's about knowing your business and what's going to make you profitable long term so just have a really good think about those things and then come up with some different ideas on how to structure it so from my experience there's a way to take this to the next level and really make your profit sharing sing and that is to open your book to your employees and i know that sounds scary but i don't want you to just send them over your financial statements i want you to educate your employees on what it all means first if you can take those financial statements explain to your employees what it all means and how it all works together then they'll have a lot more context on how you're performing because believe me they are filling in these gaps already and they probably think that you're way more profitable than you actually are and might be a little bit complacent because of it once they see the real performance of the company they'll want you to be successful as well so the last component of this is when to implement a profit sharing program and it's really critical to have profit on the horizon when you do this the last thing you want to do is set an expectation with employees that you're about to share profit when profit might be two or three years out so really critical to know that you're going to be in a profitable position or that it's in the realm of possibility over the near term so if this all sounds a little bit dizzying to you because you're maybe your bookkeeping is not in order your accounting isn't in order or you don't really understand your financial statements well get those things in order first this is next level profit sharing to really accelerate your business and your profit but if you're in earlier stages where you're not really sure what your numbers are make sure you speak with your bookkeeper or accountant that this is on the horizon for you and start to get the structure in place to make that happen so thanks so much for watching it really says a lot about you as a business owner that you care about things like profit sharing that are next level that are really going to support your employees and support your business i hope this has helped at least clarify profit sharing and why it's important for lots of small businesses but also maybe encourage you to try it out yourself and build a successful program that's going to support yourself and your business so that's it i hope this video has been helpful for you please subscribe because we're putting out lots of videos like this for entrepreneurs just like you [Music] you