Profit Sharing Plans

jlomama

We own a small remodeling company and have been in business for about 3 years. We've seen tremendous growth in the last year. We have also started a new home networking/audio/visual venture wth a friend. We would like to hire him to act as a project manager for the remodeling company side but continue to partner with him on the other company. We are working a million plus hours and really need someone trustworthy to help run projects. We would like to give him a salary plus some sort of profit sharing plan. Any ideas? And how do you motivate employees to make your business grow especially when we have this other one on the side? Seems like a conflict of interest but they really go hand in hand and actually bring each other business.

Grumpy

I have a few ideas on this subject. I have a Production manager. His job is to make sure jobs run smoothly and get done on time. He is paid a base salary and recieves a monthly bonus based on gross profit. He manages all jobs currently.

If I were to have multiple project managers I would again give a base salary and give them a bonus based on the gross profit from each job they manage.

My suggestion is to ask your accountant what you can afford to pay. I ran my idea past my accountants and asked them to suggest a % for the bonus. They came back with a high salary but a low %. I flipped it and gave a low base but a high %, so it's in his better interest to bring jobs in on budget.

I've worked for some comapnies in the past that had true profit sharing plans and all employees employed longer than 1 year were eligible. Basically what ever was left at the end of the year was split up by all employees. Sure the bosses and managers tookt he biggest cuts but there were some lead men making a few extra thousand at the end of the year. It is ultimately my goal to also setup a plan similiar to this described plan for all employees (and even some subs) to share the profit they have worked hard to build.

I am an employee, I just happen to also own the company that gives me a pay check.

jlomama

Grumpy, would you be willing to share the % of profit you offer your production manager? Very curious on that. Also, does he work a set schedule or does he just work what is needed to get the job done?

Grumpy

$30k (or is it $35, i am at home so I can't look it up) base plus 10% gross profit. As a manager there is no such thing as a set schedule and this is the only problem I have with my production manager is that you have to do what it takes. That's why he is so heavily compensated based on profit.

The day starts at 6:30 AM, and he can go home when his responsibilities are met for that day.