The Importance of Profit Sharing

The Importance of Profit Sharing

If you’re running a wildly successful and profitable business, don’t hide it.

So many business owners get nervous to share their profits. They say things like, “But I don’t want my employees to know how much money I make.” All the while, that business owner drives to work in a Lamborghini and takes a private jet on all their business trips.

Their staff gets it!

Often, you don’t want to sound like you’re bragging, but there is a difference between profit sharing and bragging. Profit-sharing benefits your company if done right!

How to Share Your Profits with Your Employees

Sharing a percentage of a company’s profit with employees is excellent, but employees have to earn it and treat profit the same way owners do, otherwise, you’re wasting it.

So, how do you get them to treat it the same way?

Every month, get all the employees to meet and review the income statement together. During that meeting, look for and obsess as a team about how to make more money and how to save money in the business.

“Profit sharing is one of the most efficient processes that helps employees work beyond their capabilities to achieve greater results. It also increases the morale of the employee and employee retention rate.” – Westford University College

Make Sure They Know the Expenses

It’s important that your employees understand all the expenses of your business. If not, they might start thinking you’re making an absurd amount of money and keeping it all to yourself.

In reality, you might barely be making any money, but if they’re only looking at what your revenues are, they’ll have no way of knowing where that money goes.

Once they see those expenses and see how little money is actually being made, that’s when profit-sharing starts to benefit your company. They’ll see those expenses and think, “If we don’t help this company to grow a little bit more, save money, and become more profitable, we might be out of our jobs soon!”

Showing your employees your company’s income statements as well as expenses will show them that although a lot of money is coming in, a lot is going out, too. It will light a fire under them so that they’ll work harder to make more money for the company.

“Employees invested in a profit-sharing plan begin to take ownership of the business as their work role becomes more defined by their contribution. […] Productivity maintains higher levels when employees are given the opportunity to share in the profit margin they are creating through their efforts rather than being merely compensated for time on the job.” – Chron

Being transparent about your company’s revenue and expenses builds trust and loyalty between you and your employees as well as increases their productivity. Profit-sharing is beneficial to everyone if done correctly, so give it a try!

Do you share your profits with your employees?

Have you seen any changes in work ethic and communication when you do?

If you have questions or would like more information, I’d be happy to help. Please send us an email, and someone from my team will get in touch with you!

Editor’s Note: This post was originally published in January 2018 and has been edited for accuracy and comprehensiveness.

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