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So I decided I want to start giving him a monthly bonus based on our total sales - basically a profit sharing bonus. The thing is, I like to keep things close to the vest and don't want to do it in a way that reveals how much the site is making.
I mean, he has an idea but he would never believe how much money the site is making. And I'd like to keep it that way. It might be "awkward" if he knew how much I was really making, plus I just don't like the idea of anyone knowing what I am making.
So my question is ... would it be "weird" to offer him a profit sharing bonus but not tell him exactly what the total profits were for the month and what his exact cut is?
I mean, could I basically just say "Your bonus for the month is $4,452.12" and leave it at that? He totally trusts me and all that, and I would pay him whatever it worked out to be, but it just seems like it might be a little awkward him always wondering how much the site is making, why I won't tell him, etc.
... or is there a better way to handle this? Should I never mention the phrase "profit sharing" and just give him his bonus at the end of the month, and if he ever asks just say it's based on "many things"? It would be nice if he knew he was benefiting from the success of the site/business, and in a way that isn't "weird" ... what do you think?
I would be careful about one thing though - how much is this guy making? (You don't have to say, just think about it). If $4,500 would be a lot of extra money for him - or $13,500 if you're doing quarterly) and you give him enough cash to walk out the door, he might.
Should I never mention the phrase "profit sharing" and just give him his bonus
Since you don't want to get into your specific numbers with your manager, this would probably be your best bet - Call it a bonus and base it some monthly goal like units sold (or something like that) rather than your profit numbers... The goal gives you something quantifiable to tie it to and as well as setting guidelines for the bonus.
LisaB
Again, assuming an amount that is significant, do you currently offer health insurance? if not, perhaps you could, and cover all or a portion of the monthly premium. If you already have it, is a better plan available?
Lease your manager a nice vehicle and cover the insurance as a company perk foroutstanding loyalty and dedication to the success of the business?
Does yourmanager have an expense account in place? Company paid vacations?
There are a variety of formats you can utilize to show appreciation without disclosing information you prefer to not disclose. Based on your example figure, multiple options from the above may be possible, so it's probably time to sit down with your CPA and attorney and get a plan together.
digitalv - $4,452.12 was just a number I pulled out of the air. His monthly bonuses won't be quite that much.
bunltd - we sell only a single product, so if he knew the total number of units sold (number of sales) then he will know roughly how much I'm making. My expenses are a tiny percentage of total reveneues, and he knows this.
But you both gave me a few things to think about. The tricky thing is I don't really have anything to tie the bonus to without him knowing about how much I'm making. At least not on the surface. Hmm ...
My employees don't know how much the company makes, or how much of it goes into my pocket. If I award anyone a bonus, even if it's based on revenue sharing, they don't have to know what percentage of the revenue they're receiving nor are they entitled to an answer if they ask. I'm sure if the sales people all got together they could probably figure it out, but they don't know how much other personnel (such as programmers, designer, SEO, etc.) are making to draw from that figure.
What I'm really curious about is why you're so worried about it?
I don't know where you hail from but I would consider a couple of things:
Check out with a human resources consultant what the implications are if you start to give a reoccurring bonus. Could you stop it if you had to?
If you call it profit sharing and you don’t show the numbers behind it, it is essentially money from heaven. But it will start to raise questions in his mind and that could be heaven or it could be hell. From his perspective the bonus will go up and down and he may not see a relationship between his effort or results and the size of the reward. I don’t think this is healthy.
Anyone can get along in good times, the real skill is to put something in place that will survive a down turn and keep you both working together.
If you going to do a bonus, tie it to their RESULTS (not effort) based on their work but also is tied to the company doing well. How about:
* keeping receivables down,
* a retention bonus,
* managing administrative expenses
You may want to let them select what the bonus would be through implementing a cafeteria bonus plan where he can pick time off, money, more in his retirement fund, …..
Remember, you had the idea, you took the risk, your on the nut if the company gets sued, he isn’t. That’s why you take home the lion’s share.
..... Shane
PS If you simply have too much money, just sticky me and I'll let you ship me some :)
Remember, you had the idea, you took the risk, your on the nut if the company gets sued, he isn’t. That’s why you take home the lion’s share.
Yup. Many times, the most rich are the ones who "work" less. But, they take risk and has a vision.
Making 7 figures and wondering how much to give as a bonus... now that's a nice problem to have!
Actually, the more I listen to this guy the more I think the whole thing was completely made up. People who run businesses that are as successful as limitup suggests don't have this problem. I mean really, who comes to a friggin WEBMASTER forum and asks how they should structure their profit sharing? Come on... Successful business owners also know what it takes to get a business going and that they've earned their high salary and their employees earn their lower ones. Heck, look at public companies, all of the top brass salaries are posted wide open for the whole world to see but you don't see employees quitting or getting pissed off because they don't make that much very often ... and when you do, you usually point and laugh at them.
People who brag like this and ask such a stupidly obvious question (and then don't even listen to the answers from other people who really DO know what the heck they're doing) are usually people who either (a) have nothing, or (b) are planting a seed as a point of reference later so people will THINK their little one-man basement operation is really a thriving online enterprise.
As far as the stupid comments and name calling from digitalv, I won't waste my time responding to those. Get a life dude.
To everyone else who responded to this up and coming small business owner who has never made this much money before and never been in this situation before, thanks!
And then what do you do after you take them sailing on your new boat and you haven't shared the wealth again?
Keep it to business.
..... Shane
I largely agree with digitalv's comments, I'm not in his league right now, but may nudge those magical 8 figures next year.
I do make my company's figures available to all employees, and I don't hide them from any client or supplier either. If they ask, they will be told the truth. It is something to be proud of, not ashamed of, or nervous of.
Any semi-intelligent person can work out a reasonably accurate figure for a web based business on their own. There is no point in hiding the bottom line IMHO!
If the employees have a "jealousy" problem in that arena they are always free to leave and start up on their own (maybe not as immediate competitors granted, but in another similar market).
In reality if you treat the employees fairly, the vast majority will not want to leave, they will want to stay with the proven formula and take their fair share of the success, which might be only a tiny percentage of profits, but they will still thank you for it! and you should thank them in return for their contribution to it.
The first lesson I ever learnt in business was that a company is just a group of like minded individuals. They may all make very different amounts of money, but a good group will all share the same ideals and goals. Trying to keep the team happy is not easy, usually they all want very different things, but if you can get close to that target you will have a good team for a long time. I pleased to say no one on our team has ever left, and no client or supplier has ever left either in the last five years.
I largely agree with digitalv's comments, I'm not in his league right now, but may nudge those magical 8 figures next year.
I do make my company's figures available to all employees, and I don't hide them from any client or supplier either. If they ask, they will be told the truth. It is something to be proud of, not ashamed of, or nervous of.
Any semi-intelligent person can work out a reasonably accurate figure for a web based business on their own. There is no point in hiding the bottom line IMHO!
If the employees have a "jealousy" problem in that arena they are always free to leave and start up on their own (maybe not as immediate competitors granted, but in another similar market).
In reality if you treat the employees fairly, the vast majority will not want to leave, they will want to stay with the proven formula and take their fair share of the success, which might be only a tiny percentage of profits, but they will still thank you for it! and you should thank them in return for their contribution to it.
The first lesson I ever learnt in business was that a company is just a group of like minded individuals. They may all make very different amounts of money, but a good group will all share the same ideals and goals. Trying to keep the team happy is not easy, usually they all want very different things, but if you can get close to that target you will have a good team for a long time. I pleased to say no one on our team has ever left, and no client or supplier has ever left either in the last five years.
If the employees have a "jealousy" problem in that arena they are always free to leave and start up on their own (maybe not as immediate competitors granted, but in another similar market).
That right there says it all. You are the boss, you started the company, you are entitled to whatever you choose to make. If your employees don't like it, let them decide to leave and miss out on any possible future success.
-Matt
I'm "worried" about any of my employees, especially him, knowing that I will over 1 mil this year from the website. Expenses are very low and the bottom line is that if he knows how much the site is making, he has a pretty good idea of how much I'm pocketing. I pay him well - he'll earn over 100k this year. But I'm going to make 10 times that much for doing a lot less work than he does, and I just don't want him to know that...
Pardon me if I'm off the mark here, but you sound like you feel a bit guilty - my suggestion is to eliminate any feelings of guilt or propitiation you may have about this hard working, competent employee...be honest with him that you feel he deserves a share in the profits, and then share the profits with him. That's what you wanted to do in the first place, right? :)
