Business Education

Considering Setting Up an Employee Profit-Sharing Plan? Here’s What You Need to Know

When it comes to small businesses, one of the biggest challenges is finding ways to keep employees happy and motivated. This, especially in challenging times such as these, when there’s a labor shortage and even qualified individuals aren’t seeking new opportunities or becoming statistics of the Great Resignation. What’s more, it can be tough to compete with larger businesses when it comes to salary and benefits. One way that small businesses can attract and retain top talent is by setting up an employee profit-sharing plan. In this blog post, we will discuss the pros and cons of employee profit-sharing plans and why they are so beneficial for small businesses.

Biggest Concerns Small Business Usually Have about Employee Profit-Sharing Plans

There are a few drawbacks to setting up an employee profit-sharing plan as well. Obviously, the biggest concern is the expense. There can be some costs associated with setting up and maintaining a profit-sharing plan. Doing so can be complex. Profit-sharing plans are generally nuanced, and it is important to make sure that they are set up correctly. Otherwise, it could create problems down the road. Moreover, these programs usually include tiers, making them even more difficult to establish in the beginning.

A profit-sharing plan, also referred to as a deferred profit-sharing plan, gives employees a share in the profits of the company based on the company’s earnings. Employee profit-sharing plans have distinct advantages, which contribute to a small business’s overall morale and bottom line. —Houston Chronicle Small Business

Employee trust is yet another common issue. Employees need to trust that the company is doing well and that their hard work is actually contributing to the company’s success. If there is a lack of trust, employees may be less likely to participate in the profit-sharing plan. In other words, at least some plans require employees to give up part of their immediate compensation (or future earnings).

Pros of Employee Profit-Sharing Plans

However, though downsides do exist, there are several benefits to setting up an employee profit-sharing plan. Some of the biggest benefits that create win-win situations for employees and businesses alike include:

Increased morale and motivation. When employees see that they are benefiting from the company’s success, they will be more motivated to work harder and be a part of the company’s success.
Increased productivity. When employees are motivated and feel appreciated, they will be more productive in their work. This boosts overall output and contributes to a healthier bottom line, which likewise contributes to the profit-sharing model.
Attracts and retains top talent. Employees want to know that they are valued and that their hard work is being duly rewarded by making the company financially stronger. A profit-sharing plan shows employees that you care about them and want to reward them for their hard work.

Overall, setting up an employee profit-sharing plan can be a great way to attract and retain top talent at your small business. While there are some drawbacks, the pros far outweigh the cons. If you are considering setting up a profit-sharing plan, be sure to consult with an accountant or financial advisor to make sure you are doing it correctly. My firm has helped many of our Clients set up profit-share plans that have been very effective in providing incentives for those employees who qualify and contribute to the success of the business profitability. What other advantages and disadvantages would you include? Please share your own thoughts and experiences so others can make a more informed decision. Interested in learning more about business? Then just visit Waters Business Consulting Group.

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Entrepreneurs Beware! Planning Can Easily Put You On a Road to Failure. Here’s Why

October 27, 2023 No Comments

Entrepreneurs Beware! Planning Can Easily Put You On a Road to Failure: Here’s Why Entrepreneurship is a realm often associated with innovation, risk-taking, and adaptability. However, in the quest for success, entrepreneurs can sometimes fall into the trap of overplanning, meticulously trying to account for every detail. Ironically, this excessive planning, which might seem like a prudent approach, can impede their journey toward success. Why Overplanning is So Counterproductive Overplanning is a common pitfall for entrepreneurs. It can be tempting to spend hours, days, or even weeks crafting the perfect business plan before taking any action. However, overplanning can actually prevent entrepreneurs from succeeding in business. Here are a few reasons why: Overplanning can lead to analysis paralysis. When entrepreneurs spend too much time planning, they can become so bogged down in the details that they never actually take action. This can be a fatal mistake, especially in the early stages of a business when it’s important to be agile and adaptable. Overplanning can lead to missed opportunities. The business world is constantly changing, and entrepreneurs who are too focused on their plans may miss out on new opportunities that arise. For example, if an entrepreneur is spending months developing a new product, they may miss out on the chance to launch a similar product that is in high demand now. Overplanning can lead to wasted resources. Time and money are precious resources for entrepreneurs, and overplanning can lead to a waste of both. Entrepreneurs who spend too much time planning may not have enough time or money to execute their plans effectively. Overplanning can lead to bad timing. An entrepreneur may spend a lot of time developing a new product, only to find that there is no demand for it when it is finally launched. This is because the market may have changed in the period since the entrepreneur started planning the product. Overplanning can lead to counterproductivity. An entrepreneur may spend too much time planning their marketing strategy, and not enough time actually executing it. This can lead to missed sales opportunities. Overplanning can lead to poor ROI. An entrepreneur may overspend on developing their website or other marketing materials, only to find that they don’t generate the desired results. This is because the entrepreneur may have not done enough research to understand their target market and what they are looking for. How Entrepreneurs Can Avoid the Overplanning Trap While planning is indeed a necessity, it can easily be overdone to the point it becomes problematic instead of advantageous. With this in mind, it’s important to know how to stay away from its trap. So, how can entrepreneurs avoid overplanning? Here are a few tips: Set a deadline for your planning. Give yourself a reasonable amount of time to develop a business plan, and then stick to that deadline. Don’t let yourself get bogged down in the details. Focus on the most important things. When you’re planning your business, focus on the most important things, such as your target market, your value proposition, and your financial projections. Don’t worry about the less important details until later. Be flexible and adaptable. Be prepared to change your plans as needed. The business world is always changing, and entrepreneurs need to be able to adapt their plans accordingly. Take action. Don’t wait until your plan is perfect to start taking action. The best way to learn is by doing. So, get out there and start testing your ideas. While planning is undeniably essential in entrepreneurship, there is a fine line between thoughtful preparation and overplanning. Entrepreneurs must strike a balance, embracing the unpredictable nature of the business world. Flexibility, adaptability, and a willingness to learn from mistakes are qualities that can propel entrepreneurs to success. By avoiding the pitfalls of overplanning, entrepreneurs can successfully navigate the challenges of entrepreneurship with agility and resilience, increasing their chances of long-term success in the ever-changing business landscape. Right now, you can get John Waters’ latest book for FREE! (Currently selling for $19.95 on Amazon). This inspiring book titled “Profit by Design: The Blueprint to Successfully Scale Your Business and Regain Your Freedom” is a must-read for business owners who want to do just that! Request your FREE copy in any of the following ways: By phone 602-435-5474 Visit Waters Business Consulting Group By email: Steve@WatersBusinessConsulting.com

Here’s the Real Reason MoviePass is Failing So Spectacularly (Hint_ It’s Not what You Think)

September 13, 2018 No Comments

MoviePass is failing in-part because it didn’t fully understand the business on which it tried to build its own empire. A slew of news interviews with theater operators points this fact out. They say the service just doesn’t understand how the cinema business works. But, perhaps more importantly, what’s caused things to go so badly in such a short time is it was always too good to be true. In other words, the company overpromised. That’s really why the startup is quickly sputtering out-of-control. And, it’s what gets far too many fledgling companies in big time trouble. Eager to please and deliver jaw-dropping results, they promise the moon and hardly leave earth’s atmosphere. Biggest Overpromising Pitfalls Undoubtedly, critics say it’s time to face reality and close up shop. Irate subscribers and suing shareholders might disagree. (The former wants out, while the latter wants its investment money back.) But, it’s now apparent the movie-selling service just can’t operate as it has. And, for good reason. When you overpromise, you put undue pressure on yourself. Not to mention, you artificially raise expectations to unreachable heights. How many times has a salesperson promised to increase your company’s exposure by 50%, double your client list, and quadruple your profit margin? In this age of instantaneous satisfaction (thanks, technology!), many entrepreneurs and corporate leaders are so eager to appease stakeholders and worried about the bottom line that they seize amorphous opportunities and are disappointed with the results. —Forbes.com There’s more downsides to overpromising. You’re not only letting down one customer, you’re also sending a message that you just aren’t competent or capable of delivering. Then, there’s also the fact that you create resentment among your employees — toward you and each other. 3 Effective Ways to Avoid Overpromising So, how do you avoid the trap of overpromising. After all, you want to sell your business as the solution. Here are a few helpful suggestions for how to avoid overpromising: Learn your customer’s expectations first. Before you begin making promises about what you can do for someone, be sure to ask about their expectations. There’s no good reason to offer lofty solutions or goals when you don’t know what’s really needed. Be completely open, honest, and transparent. As you’re talking with your customer (and with your own team), it’s very important to always be honest. One of the fastest ways to invite disaster is to keep secrets. It’s just counterproductive to hold back because it will eventually come back to bite you. Keep all communications flowing between everyone involved. Communication either solves or prevents a whole lot of misunderstandings. It’s not enough to just be honest but also, to make yourself accessible. When everyone communicates, everyone is on the same page. And, that’s an invaluable element since it paves the way to success when all parties are on-board and totally in-the-know. What other ways do you avoid overpromising? Or, what other advice would you give? Please share your thoughts and experiences by commenting! Interested in learning more about business? Then just visit Waters Business Consulting Group.

Your Industry Is Dying, But You Can Survive (and Thrive!)

June 19, 2025 No Comments

Industries evolve rapidly, and business owners may face the daunting reality that their skill set—or even their entire industry—is becoming obsolete.