Dave WordenTriumph Business Solutions · Founder

Employee Profit Sharing Distributions Using Profit First

6 Jul 2020 · 2 min

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1:32

In this brief instructional video, Mike Michalowicz, author of Profit First, demonstrates a simple spreadsheet calculator designed to allocate quarterly profit distributions between owners and employees. He walks through the steps: selecting the quarter, entering the profit account balance (the "no‑temptation" account), applying the default 50% distribution rule, and then splitting the distribution using a default 80/20 split (80% to owners/shareholders, 20% to employees). He shows how to calculate individual employee bonuses based on the number of eligible employees (those with at least one year of service), using a concrete example of $1,000 profit, a $500 distribution, and two eligible employees receiving $50 each. Michalowicz notes that the percentages are adjustable but have proven effective in practice, and he directs viewers to his website for further 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 Q1, 20, 21. How much money is in your profit account? Now, if you're following the proffers 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. 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. They have to be here at least one year. So if I have two employees, there's $100 in the 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, that these percentages that are in here, by default, very effective. I'm wishing you tremendous success, tremendous profits, and here's your health and wealth. Oh, and for more tips like this, go to mikemotorbike.com.