Diane GardnerFounder, Adept Business Solutions · Profit First Professional

Employee Profit Sharing Distributions Using Profit First

6 Jul 2020 · 2 min

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1:31

In this video, Mike Michalowicz, author of Profit First, demonstrates a straightforward calculator for allocating quarterly profit distributions to owners and employees. He walks through the process step‑by‑step: (1) record the quarter (e.g., Q1 2021) and the balance in the profit‑first “no‑temptation” account; (2) apply the default distribution rule of 50 % of the accumulated profit (e.g., $1,000 → $500 distribution). He then enters the distribution amount, splits it by default into 80 % for owners/shareholders and 20 % for employees (modifiable), resulting in $400 for owners and $100 for employees in the example. (3) Determine eligible employees – those with at least one year of service – and divide the employee pool equally (e.g., 2 employees → $50 each as a quarterly bonus). Mike notes the percentages are adjustable but have proven effective in his experience, and he closes with well‑wishes and a link to his site for further tips.

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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 it'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.