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Hi everyone,
I wanted to share an update following the incredible advice I received in my previous thread, [“I am 29. My business makes me $2M in income a year. What next?”].
TL;DR of My Original Thread:
• I’m 29 (30 now) and run a niche online education business that I founded 5 years ago.
• Business was highly profitable during COVID, making $10M a year in profit, but profits have since stabilized to $2M annually.
• I own 100% of the business, which employs 30 people.
• I was exploring options to step back, including:
-Hiring a CEO or General Manager with a structured profit-sharing deal.
-Selling the business, but low buyer interest due to its niche nature.
• The main goal: Reduce my involvement in the business while maintaining or growing its profitability.
Over the past months, I’ve deeply considered the advice given. I explored selling the business to investors or funds, but due to its niche nature, I found that buyers were only willing to pay low multiples, which didn’t make sense for me financially. As a result, I’ve decided to focus on hiring and incentivizing key talent to manage and grow the business while I step back further.
Key Developments:
1. Promoting and Empowering My Marketing Manager:
I’ve identified my current marketing manager as a strong candidate to take over most of my operational responsibilities. She’s been with the company for some time, truly cares about the business, and has consistently demonstrated exceptional heart and commitment.
By promoting her to Head of Marketing and offering a profit share, I can significantly reduce my involvement in the business to less than 10 hours a week, effectively earning an almost passive income of ~$1.5M–$2M annually while focusing on other pursuits.
2. Structuring a Profit Share Incentive:
To ensure her incentives align with the company’s success and to make her feel more like a partner than an employee, I want to introduce a profit-sharing structure on top of her existing compensation.
Her current compensation:
• Monthly Salary: $6,800
• Annual Bonus: 2 months’ salary
• Total: (Monthly Salary = $6,800*12 = $81,600) + (Annual Bonus = $6,800*2 = $13,600) = $95,200/year
Business performance:
• Net Profit (After Taxes): ~$1.8M annually
Proposed profit share options without her Annual Bonus:
• 1% profit share: Total comp = $81,600 + $18,000 = $99,600 (5% increase from current compensation of $95,200)
• 2% profit share: Total comp = $81,600 + $36,000 = $117,600 (23.5% increase from current compensation of $95,200)
• 3% profit share: Total comp = $81,600 + $54,000 = $135,600 (42% increase from current compensation of $95,200)
I’m leaning toward the 2% or 3% profit share to ensure she’s significantly incentivized while keeping the structure sustainable for the business.
Questions for the Community:
1. Is a 2% or 3% profit share reasonable for this level of responsibility?
• I believe this structure would be simple and motivational. She would have to oversee all revenue generating activites in the company, effectively becoming the 'Chief Marketing Officer / Chief Revenue Officer'.
2. How should I formalize the profit share agreement?
• Should I base it purely on net profit? Include contingencies for business downturns or growth?
3. Any other considerations when offering profit share?
• I want to ensure this structure rewards her efforts without introducing unnecessary complications or risks for either party.
4. Would I have to reveal the full financial statements to her?
• I would prefer her to only know the bottom line profit, instead of looking through the full financial statements. In that case, how can she take my word for what the profit is?
Thanks in advance for your advice and insights! This forum has been invaluable in shaping my journey, and I’m always grateful for the community here.
Looking forward to your input!
Best,
yungmillionaire
I wanted to share an update following the incredible advice I received in my previous thread, [“I am 29. My business makes me $2M in income a year. What next?”].
TL;DR of My Original Thread:
• I’m 29 (30 now) and run a niche online education business that I founded 5 years ago.
• Business was highly profitable during COVID, making $10M a year in profit, but profits have since stabilized to $2M annually.
• I own 100% of the business, which employs 30 people.
• I was exploring options to step back, including:
-Hiring a CEO or General Manager with a structured profit-sharing deal.
-Selling the business, but low buyer interest due to its niche nature.
• The main goal: Reduce my involvement in the business while maintaining or growing its profitability.
Over the past months, I’ve deeply considered the advice given. I explored selling the business to investors or funds, but due to its niche nature, I found that buyers were only willing to pay low multiples, which didn’t make sense for me financially. As a result, I’ve decided to focus on hiring and incentivizing key talent to manage and grow the business while I step back further.
Key Developments:
1. Promoting and Empowering My Marketing Manager:
I’ve identified my current marketing manager as a strong candidate to take over most of my operational responsibilities. She’s been with the company for some time, truly cares about the business, and has consistently demonstrated exceptional heart and commitment.
By promoting her to Head of Marketing and offering a profit share, I can significantly reduce my involvement in the business to less than 10 hours a week, effectively earning an almost passive income of ~$1.5M–$2M annually while focusing on other pursuits.
2. Structuring a Profit Share Incentive:
To ensure her incentives align with the company’s success and to make her feel more like a partner than an employee, I want to introduce a profit-sharing structure on top of her existing compensation.
Her current compensation:
• Monthly Salary: $6,800
• Annual Bonus: 2 months’ salary
• Total: (Monthly Salary = $6,800*12 = $81,600) + (Annual Bonus = $6,800*2 = $13,600) = $95,200/year
Business performance:
• Net Profit (After Taxes): ~$1.8M annually
Proposed profit share options without her Annual Bonus:
• 1% profit share: Total comp = $81,600 + $18,000 = $99,600 (5% increase from current compensation of $95,200)
• 2% profit share: Total comp = $81,600 + $36,000 = $117,600 (23.5% increase from current compensation of $95,200)
• 3% profit share: Total comp = $81,600 + $54,000 = $135,600 (42% increase from current compensation of $95,200)
I’m leaning toward the 2% or 3% profit share to ensure she’s significantly incentivized while keeping the structure sustainable for the business.
Questions for the Community:
1. Is a 2% or 3% profit share reasonable for this level of responsibility?
• I believe this structure would be simple and motivational. She would have to oversee all revenue generating activites in the company, effectively becoming the 'Chief Marketing Officer / Chief Revenue Officer'.
2. How should I formalize the profit share agreement?
• Should I base it purely on net profit? Include contingencies for business downturns or growth?
3. Any other considerations when offering profit share?
• I want to ensure this structure rewards her efforts without introducing unnecessary complications or risks for either party.
4. Would I have to reveal the full financial statements to her?
• I would prefer her to only know the bottom line profit, instead of looking through the full financial statements. In that case, how can she take my word for what the profit is?
Thanks in advance for your advice and insights! This forum has been invaluable in shaping my journey, and I’m always grateful for the community here.
Looking forward to your input!
Best,
yungmillionaire
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