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What's the best bonus plan for your business?

Nov 29, 2022

It's the end of the year and you want to give out bonuses. So what do you do? You'd be surprised how often people just give out bonuses. They just give out arbitrary numbers, amounts of money to their employees without even thinking about why or how or who gets what it happens even in the most experienced business owners. They do it every year.

Some people base it on the pile of money they have at the end of the year and the way they're feeling. I think it's very important to have a structured bonus plan because bonuses can be very motivating, but they can also be very demotivating. So think about this from the employees perspective. Somebody might be there for three months and get the same bonus as someone who's been there for three years.

You may also have people that just don't pull their weight when it's all said and done. You got a bunch of hard workers and then you have a few people who probably really don't deserve what the hardworking folks get. And that's another problem for another video. I believe your company's bonus structure really should be based upon one thing your primary goal.  So often it's your revenue goal for the year, and if you achieve it, well, then people deserve bonuses and that should be based upon their individual contribution to the overall company's goal.

Another way to ensure that your employees are performing is by holding quarterly performance reviews. I've talked about that in other videos, but basically you want to monitor their performance every quarter to ensure that they continually contribute and they're engaged in the goals of the company.  I really like basing their bonuses on their salaries, not on just some arbitrary number.

So let's say employee A makes $50,000 and you want to base their bonus on their salary? Well, you would pick a percentage of their salary and you would pay them if the company reached this revenue goal. If the company didn't reach its revenue goal, then it's not going to have this pool of money to be distributed. Maybe you have a range of percentages. One or two or three up to 5%. Then you can have a different level for your leadership and maybe they go from 6 to 10%.

The important thing is, though, that it's structured. It's based on something. It's not some arbitrary number that you just pick out of the sky because you're in a good mood and you're doing that because next year the profits may not be there, at least if it's structured and it's not arbitrary, then they know what it's based on and they will understand that if we did not have as good a year, then the bonuses most likely won't be as good.

And it won't put you in a bad position of giving money out that you really don't have. If you need help determining which bonus structure is best for your company, just go to and schedule a call. And remember, as you grow, your company grows.  Keep growing!

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