How a Bonus leads to small business profits

Using a structured bonus system for your business allows you to maximize on the hard work and sacrifices you’ve put in to grow your company. How can you be certain they see the weight you have to carry, the struggles of owning a business. There are great things that can come, if your lucky enough to make it past the first three years of struggle, debt and sacrifice. Though it may seem hard to think that the best way to get others involved is to tie them into the profits that you’ve worked so hard to build along the way.

If your leaders are tied to the success and failure of the business they will carry some of the weight you as a business owner must bare. A structured bonus based off measurable metrics tied to the profitability (or lack their of) of the business keeps your managers/leaders driving towards the same goal of profitability that you seek.

How to structure a bonus for your warehouse?

When it comes to costs in your warehouse common variables start with loss of product (damage, theft etc), labor costs and safety. If you tie in acceptable, target and unacceptable ranges for each to hold your supervisors to it allows you to set terms to hitting a bonus, with different variables. These mixed with operational costs can allow you to develop a graded scale for bonus opportunities . The key is to develop a  system that is graded; not all or nothing.

  • Hit labor = 30%
  • Hit operational target = 30%
  • Must hit both to make you eligible for next group
    • Safety hazards = 15%
    • Shrinkage target = 15%
    • Hit all get remaining 10%

Tie them to a percentage of the profits (5-15%) depending on the operation and that is the total max they can accrue. The percentages is the amount that they become eligible for (max). The goal is to target it with short 4 week periods to keep them focused, if the range is too long people can get behind and give up on targets costing money and operational slow down.


How to structure a bonus for your restaurant?

Similar to the above structure you tie your leaders to the labor, food cost and other metrics involved. If you are a franchise you are probably tracking complaints, audit scores and regional rankings, all that can be used to hold your team accountable, reward them for great work and keep your business growing (you can find information all over explaining how this works). Managers quickly learn how to grow profits when their pay is on the line, short cuts will be found out quickly if done on a quick and efficient 4 week period.

When auditing from week to week (and period) the numbers if faked will catch up in purchasing and payroll. If they hit food and labor costs but faked the numbers profits wouldn’t be there on the PnL because money spent to pay for purchases would pull from their. This keeps people honest and pushing towards the same goals of success.


How to structure a bonus for your Web development company?

Unlike the above examples when a service based system you have to tie more people into total project time, hours used, profitability of projects and maintenance. Breaking down the bonus structure into 50% breaks when the first 50% is paid out after project is finished and the other 60 days later after total review of revisions and after project adjustments.


This is just one of many ways to manage the human element of your company and keeping people tied into the big picture and overall success of your company.  Utilizing the tools in our Blue Rock Library  and our Range Solutions can maximize your costs, growth and overall profits.

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