Hot answers tagged profit-sharing
8
Don't do it. Read Daniel Pink's book "Drive: The Surprising Truth About What Motivates Us" to find out why.
I realize that this might not be the answer you're looking for, but based on my own experience as recipient in 2 bonus systems / profit sharing models, I really think it is at best no better than regular pay, and at worst might actually do damage. ...
7
Our current profit sharing plan is actually quite simple: There's a bunch of profit at the end of the year and the amount over what the company conservatively needs to operate is split up amongst the employees based on how long they've worked at the company.
I believe this creates a fair and just reward for all the hard work that the employees have put ...
5
What you are describing is a partnership type of relationship which is a bit similar to that of a Law firm or a consultancy firm (at least the freelance part is).
This type of companies usually have a hierarchical compensation structure when it comes to revenue splitting and positions. The titles and roles may vary a bit but the basic principles should ...
4
Continuing the model of sharing profits can and should continue.
What will need to change is your model for calculating profits.
You don't want "profits" walking out of the company when you have R&D, marketing, design, development and talent costs. As your revenue grows the percentage you are taking out should go from 80% down to something reasonable. ...
3
Before discussing your specific numbers, it is important to note that in the US anyway, there is no requirement that losses be split the same way as profits. In fact it is often desirable that they be split according to some other formula due to the various participants being in quite different tax situations. In fact the at risk provisions of the income tax ...
3
You are adding a lot of overhead and friction under the guise of "transparency". Work in a startup is so fluid and rapid, that having this kind of timecard management is an overkill. Hell, even at a $15billion company this was veto'd as an overkill and the quantum of unit was changed from hours to days.
Secondly, you're adding a lot of bean counting by ...
3
The best bonus program/profit sharing plan I have ever been involved with was the Days of Pay program.
Essentially, the company would set quarterly target for simple things like sales, growth, profit, etc. At the beginning of each quarter, the CEO would set the upper level target or the maximum we could all get. For example, 7 days of pay.
Next, the plan ...
2
I'd suggest you (meaning together with the marketeer) define a set of Key Performance Indicators (e.g. sales leads, conversion ratio, etc) and use this as the basis for a commission plan for the marketeer.
Once the ball gets rolling, have frequent site performance reviews, adding or tweaking the KPI's, thereby installing a cycle of continuous optimization. ...
2
I found this calculator very useful:
http://foundrs.com/calculator/index.php
if the one founder does not work the same time as the other, he should have a matching compensation. If founder a, working for the business, does not have a "standard compensation", he should get all, until he has a compensation which exceeds standards. Then people need to ...
2
You need to create a company, eg. an LLC or a C corp. You need
figure out who the owners of the company are, eg. just you or all
three of you. The ownership need not be equal and can be vested
over time. You could consider having the other two be consultants
or employees at first. Given what you describe, I would not part
with ownership at this point, ...
2
This sounds more like a bunch of friends who are afraid to tell their other friends that they are not needed in the team. I'm sure you realized already how bad idea it was to go 20% each with the administration guy (seriously?) the financial guy (not needed either), not to mention two sales guys before you even have something to sell.
This is why it's not ...
2
She's not investing the 100K, she's loaning it to you... and I could understand equity if it was an interest-free loan but it's not!
If you pay back the bank after buying a car/house, they don't own any of it once it's paid off!
So you could borrow money from the bank (or other for of Other People's Money -- OPM) that you would pay interest on. If you think ...
2
Do not downplay your entrepreneurial experience. Our entire executive team had at least 1 or 2 "misses" in their careers each and that is what makes us more resilient and flexible.
Even at junior levels I love seeing folks who have at least tried to run a small business. It is extremely valuable experience.
And if someone has an issue with entrepreneurial ...
2
If I were you, for the sake of my mind, I wouldn't do business like that.
From what you told, you own 100% of the company, however you should do per-app contracts with him, so that he will get a share of the income form that specific app.
However, if you don't sell the app, rather, manage the app to earn money in the long-run, you shouldn't do this too. ...
2
No, company can't decide to pay dividends only to certain individuals. One of the rights of every sharesholder, is right to get a dividend (share of profit), ofcourse if majority of shareholders decide to pay dividends at all (depends on type of limited company though)
It's true, that each share might not be justified to equal size of dividend, because of ...
2
You seem to have a simple setup so I would suggest a simple solution:
Determine a rate per hour, then record hours each one work. Payout according to actual work.
For what's left: keep it in the company for investments, paying running costs (broadband, utility, rent etc.) and marketing.
1
I was freelancing for many years - mostly blue chip multi-nationals. I worked via a company for tax purposes and legal protection etc etc - they took 5% of my money, but also (because of their size and deals with the tax man) got me a lot of tax breaks (such as claiming food allowances and car milage back from tax) - which more than made up the 5%.
However, ...
1
Profit sharing is a difficult way to incentivize employees in a small company. Typically most profit gets plowed back into the company for growth (new equipment, more head count, a founder's salary increase, etc.) so there is typically little left to distribute. This can lead to resentment. A commission might be a better way to go if you want to encourage ...
1
Percentages are up to you.
If profit shares are driven by the number of hours billed, you have to make sure the number of hours billed remain honest or you will lose your customers.
If profit shares are driven by "We had approved $400 and you did it in 2 hours perfectly, here's the $400 anyways", that's a far better profit share. By setting a fixed price ...
1
Is the P&L Management important for the job position you'll be applying? If so, I believe you should mention it, otherwise, it's irrelevant and I believe you can skip it, or put a simple reference to it as one of the many things you were also doing as an entrepreneur.
My (obvious) advice: focus on what's important and interesting when applying to a job ...
1
This seems problematic because those multipliers are going to change over time...
There are a few tools at your disposal:
salary/bonuses
profits/equity share
You can pay at a different rate to different people and also allocate money based on "left over profit".
You should consider those methods rather than a complex formula of hours and rates and the ...
1
Quoting one of my very intelligent friends who is the COO at Rapidsoft Systems, a leading developer of outsourced software, most ideas without capital to execute them have little or no value. If they did, then there would have been an "idea market" like stock exchange in every city.
Even highly evolved ideas with patents have no value unless you can ...
1
A slight investment will leverage your position in the deal. As Raj said, you can even demand better share. On the other note the key is to devise a model to share the store numbers transparently. This arrangement looks good if its a paid app. If this is free and the share is on the add revenue then be prepared to wait for a pretty long time to actually see ...
1
It sounds like you want someone to work on your idea for free. That would mean you're looking for a co-founder, not an employee. (Though not necessarily an equal partner.)
As far as students go, the cost really depends on where you're located at, as well as the quality of the person you want to hire. Look around on a local university's job board and see ...
1
Think of this from the employee's point of view. The standard model for most employees is they get paid a wage to do a job. You're in essence talking about giving them 20% of your revenue, this leaves you with scalability issues if you ever grow.
I would give them a fixed salary for a fixed number of hours, no profit sharing. Ultimately, if they don't bring ...
1
IMHO - If you can learn coding, you can learn internet marketing. It's not all affiliate deals and flashy single page squeeze pages that warrior type sites promote. google customer development / read a few lean books to get some other perspectives.
But.. if you don't want to dedicate the time, then outsourcing it is always an option.
1
I agree with Tim, the deal seems a bit one sided from my standpoint.
If she wants to be an investor, and share in your success, give her the 20% of your company. That's a pretty generous investment. However, if she's not willing to take a risk with you on the company, she shouldn't be given an ownership share with you.
Though, if you do think she'll ...
1
A great way to go about it is to make it a tandem effort.
Let the author know he will receive 5% of all net profit for first 10 years or up to $1 million dollars paid to author. Make sure the author's likeness can still be used after this has been met.
Offer a way for the author to direct traffic to the site by using a unique URL, so leads can be tracked. ...
1
Profits should always be shared based o nthe ownership between the two partners. if the partners still each own 50% of the company-- then the profits should be shared 50/50.
This does not mean that revenue need be shared 50/50. Revenue should be spent according to the business's budget which includes compensation for the actual work done.
Is only one ...
1
This answer will give you a great start on how to divide up the equity in your firm and give you a framework on how to approach it.
Now, for your specific example, it looks like this investor expects 50% of the company because he wants 50% of the profit. I'm not sure that makes a whole lot of sense.
I would calculate how much you guys have put in (dollar ...
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