How Do You Calculate and Figure Out If You Can Afford Those Year-End Bonuses?

In This Episode

At this time of year, it’s always great to take some time and reflect on the blessings we each have in our lives and give thanks. Jack and I are truly blessed to be business coaches and work with some truly fantastic small business owners. We are also blessed to have a business partnership that has lasted for 15 years with very little discord!

It’s also that time of year when business owners (and their teams) start thinking about year end bonuses. The employees think about how big the bonuses will be and the owners will be wondering how can they pay for all those year end bonuses. There is no magic wand or simple formula to follow, but in tonight’s show we walked through an example for how to calculate a bonus pool for your team. A key part of this calculation is to account for things that don’t impact profit but do impact cash flow and can often make it painful to afford paying these bonuses.

With a client we had this week, we were going through some calculations and it turns out that there was no money to pay bonuses, but after a lot of discussion he said he still wanted to find a way to pay some bonuses. So we walked through how he could communicate his decision to his team. At the end of the day, it’s key to explain your thinking to your team because they may not like it, but they will certainly understand it better and in the end respect you.

In tonight’s show we addressed many of these items and shared some of the guidance we provided for our clients. Let us know if you’re wrestling with any of these questions, tweet at us @MaximumVP.