Monday, August 07, 2006

Profit share - beware

Having an accounting background I know about profits. Profits are whatever you want them to be. If you've promised your staff 50% of this year's profits then the easy way to eliminate that obligation is to pay yourself an enormous salary bonus performance check before the end of the year and eliminate all profits. Wasn't that easy? No need to pay all the minions your company's money.

The savvy employee will request a revenue share instead of a profit share. It's up to management and the accountants to watch the expenses. Usually, your impact is on the revenue of the company only and not on the expenses side. That way you are being rewarded for the part that you can influence and side-step any creative accounting that your company may be seduced by.

I thought that I'd write this while I was unemployed so that it wouldn't look like I was pointing a finger at a company that employed me.


Tim B. said...

Yeah I like your theory.

But it would be a tough break trying to find a company willing to do that don't you think?

As the risk for them is soo much greater....

Guy Ellis said...

Well that depends. I think that a well established company would not do that. However, a startup company probably would. I talked to someone recently who is in the process of starting up a company and he said that he would reward employees in that manner instead of profits.

The problem is that profits are so easy to manipulate (as you know Mr Accountant) and can be anything that you want them to be - correct? Revenue, however, is almost impossible to manipulate - right?