Mike MichalowiczBusiness Author & Keynote Speaker Empowering Entrepreneurs

Employee Profit Sharing Distributions Using Profit First

6 Jul 2020 · 2 min

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1:32

In this brief video, Mike Michalowicz, author of Profit First, demonstrates a straightforward spreadsheet calculator designed to allocate quarterly profit‑sharing bonuses to owners and employees. He walks through each input field: the quarter being evaluated, the balance in the profit (or “no‑temptation”) account, and the chosen distribution percentage (typically 50% of the accumulated profit). He then shows how the calculator splits the distribution between owners (default 80%) and employees (default 20%), and how the employee portion is divided equally among eligible staff—those who have been with the company for at least one year. Using a $1,000 profit balance as an example, Mike calculates a $500 distribution, allocates $400 to owners and $100 to employees, and then distributes $50 to each of two qualifying employees. He notes that the percentages are adjustable but have proven effective in practice, and ends with a call to action for further resources.

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.