Christie JungeA Plus Solutions Inc. · CEO | Profit First Professional

Employee Profit Sharing Distributions Using Profit First

6 Jul 2020 · 2 min

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1:32

In this brief instructional video, Profit First author Mike Michalowicz demonstrates a simple spreadsheet calculator for allocating quarterly profit distributions to owners and employees. He walks through the process step‑by‑step: record the quarter (e.g., Q1 2021), check the balance in the profit‑first “no‑temptation” account, apply the default distribution rule of 50 % of accumulated funds, and then split that amount using the default 80 % to owners (shareholders) and 20 % to employees. Using a $1,000 profit balance as an example, the calculator yields a $500 distribution, which is divided into $400 for owners and $100 for employees. Eligibility for the employee share requires at least one year of service; the employee portion is then divided equally among eligible staff (e.g., $50 each for two employees). Michalowicz notes that the percentages are adjustable but have proven effective in practice, and he directs viewers to mikemotorbike.com for additional tips.

Chapters

Hi, it's Mike Michalowicz here, the author of Profit First, and I want to show you a simple calculator you can use to do profit distributions with your team. So if you want to do a profit share, this is the tool and it's very simple. First, you just document the quarter you're doing it for. So say this is, you know, Q1 2021. How much money's in your profit account? Now, if you're following the Profit First principles, This is the no temptation account. What's your distribution percentage? What I guide in the book is 50% of the accumulated funds. So if there's $1,000 in here, it's a $500 distribution. Uh, and then you put in the dollar amount here. So $500 would go here. Owner's percentage, typically what I suggest, but this is modifiable, is 80% to the shareholders of the organization, the ones who took the risk, the ones who are creating jobs, and 20% to the employee distribution. So say there's $500, that's $400 for the owner or owners, that's $100 to be shared with employees. Then you look at the number of employees you have. We do, they have to be here at least 1 year. So if I have 2 employees, there's $100 in this account, the individual employee distribution is a $50 quarterly bonus for each person. That's how simple this system is. And of course the percentages are up to you, but we've been doing this for quite a few years now and found that these percentages that are in here by default are very effective. I'm wishing you tremendous success, tremendous profits, and here's to your health and wealth. Oh, and for more tips like this, go to mikemotorbike.com.