---
title: Simple Profit Sharing Plan For Contractors
description: Creating a profit sharing plan can be very involved process. Lots of details need to be considered before offering the plan to employees.
image: https://www.shawnmccadden.com/hs-fs/file-19959963-jpg/images/profit_sharing_puzzle-wr.jpg
---

[![the design builders blog](https://www.shawnmccadden.com/hs-fs/file-1968953853-jpg/images/ShawnMccadden-DBblog-header.jpg "the design builders blog")](https://www.shawnmccadden.com/)

[![Subscribe to the Design/Builders Blog](https://no-cache.hubspot.com/cta/default/81069/62868785-47fb-4751-8ade-e9392edbbdd1.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/62868785-47fb-4751-8ade-e9392edbbdd1)

# The Design Builder's Blog

## [Simple Profit Sharing Plan For Contractors](https://www.shawnmccadden.com/the-design-builders-blog/bid/86474/Simple-Profit-Sharing-Plan-For-Contractors)

Posted by [Shawn McCadden](https://www.shawnmccadden.com/the-design-builders-blog/author/shawn-mccadden) on Thu, Feb 07,2013 @ 06:00 AM

- [Tweet](https://twitter.com/share)

## **Simple Profit Sharing Plan For Contractors**

![profit sharing for remodelers](https://www.shawnmccadden.com/hs-fs/file-19959963-jpg/images/profit_sharing_puzzle-wr.jpg?width=204&height=125&name=profit_sharing_puzzle-wr.jpg)

Recently, several of the contractors I work with have asked for **help developing profit sharing plans.**   Because they are looking to **take advantage of the benefits of profit sharing** I thought others may want to consider a profit sharing plan at their  remodeling businesses as well.

Profit is the reward a business and the business owner earns for the risks taken by being in business.  Profit sharing is in effect a type of **reward program for company employees**.  It is based on sharing a percentage of the total profits earned by the company with the employees who helped earn it.  Profit sharing plans are used to help encourage and foster employee awareness and participation in **creating, protecting and maximizing the profit earned by the business. **

### **Open Book Management:**

Open book management is the process of sharing in detail the company’s financial statement with the entire staff on a monthly or quarterly basis. If you want your employees to contribute to protecting and earning profits you'll need to share financial information with them and help them understand how to interpret and use that information.

 

### **![remodeler profit sharing plan](https://www.shawnmccadden.com/hs-fs/file-19960384-jpg/images/profit_and_loss_sign-wr.jpg?width=240&height=180&name=profit_and_loss_sign-wr.jpg)Why Profit Sharing and Open Book Management?         **

- Both can **increase collaboration** between office and production staff to help improve efficiency and productivity.
- Everyone has a stake in working together to **eliminate waste and duplication of effort.**
- Because the responsibility as well as the benefits of profit are shared, **team members take ownership** in the company’s profitability and health.
- Open books and sharing of profit **can create a trusting and supportive environment** for all involved.

 

### **Creating a Profit Sharing Plan for Your Construction Business**

Creating a profit sharing plan can be very involved process.   Lots of details, way more than can be included in a short blog post, need to be considered before offering the plan to employees.  If not well thought out before it is introduce, **mid stream changes to the plan may cause employees to lose their confidence** in the plan and the business.  

 

### **Sample Plan**

Below is an illustration of how a simple profit sharing plan might work.   This plan is based sharing 10% of a company’s planned net profits with all employees.   With this plan pay-out to employees for profits earned each quarter would be 50% of the profit sharing earned with the balance paid after year end final accounting has been completed.  Also, in the example below if quarterly profit goals are not reached, employees will not receive profit sharing funds during that quarter, but may still get the money earned for that quarter at the end of the year if the overall performance for the year proves successful.

**Annual profit goal: $100,000**

**Quarterly profit goal : $25,000**

**  
**

![Sample profit sharing plan for a contractor](https://www.shawnmccadden.com/hs-fs/file-19957748-jpg/images/sample_profit_sharing_example-wr.jpg?width=582&height=147&name=sample_profit_sharing_example-wr.jpg)

### **Based on the example above, assuming you have a total of 10 employees on staff:**

> > - First Quarter – no profit sharing would be paid
> > - Second Quarter –each employee would be paid $150 in profit sharing (50% of $300)
> > - Third Quarter – no profit sharing would be paid
> > - Fourth Quarter – each employee would be paid $200 in profit sharing (50% of $400)
> > - If Annual Goal is achieved – each employee would be paid an additional $650 in profit sharing

**Total bonus paid to each employee for this example ………. $1,000 ($10, 000 ÷ 10 employees)**

**  
**

 Topics: [Business Financials](https://www.shawnmccadden.com/the-design-builders-blog/topic/business-financials), [Profit Sharing](https://www.shawnmccadden.com/the-design-builders-blog/topic/profit-sharing)

### Subscribe by Email

[![please donate](https://no-cache.hubspot.com/cta/default/81069/d6888f7b-f488-4356-88b4-14128c5aab4b.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/d6888f7b-f488-4356-88b4-14128c5aab4b)

[![cogs worksheet tool free download](https://no-cache.hubspot.com/cta/default/81069/7baf34b1-cad0-4bdf-84eb-b21dd6da4973.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/7baf34b1-cad0-4bdf-84eb-b21dd6da4973)

[![MA CSL Classes](https://no-cache.hubspot.com/cta/default/81069/663d3a42-f898-41b6-850d-dd6c96899668.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/663d3a42-f898-41b6-850d-dd6c96899668)

### Are You Documenting Your Crew's  Compliance With The RRP Rule? 

[![download free RRP checklist](https://no-cache.hubspot.com/cta/default/81069/dd6aace9-6cb0-4ad2-a55a-09846d7f5b5e.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/dd6aace9-6cb0-4ad2-a55a-09846d7f5b5e)  

### Frustrated With Your Current Method Of Estimating Projects? 

 [![free excel estimating template](https://no-cache.hubspot.com/cta/default/81069/14387bf1-ade4-4b88-9c17-1b56a85bab52.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/14387bf1-ade4-4b88-9c17-1b56a85bab52)

## Not Sure Of Your True Labor Costs?

 [![New Call-to-action](https://no-cache.hubspot.com/cta/default/81069/390dc019-2e22-41cc-8b47-eeb259f25bf3.png)](https://cta-redirect.hubspot.com/cta/redirect/81069/390dc019-2e22-41cc-8b47-eeb259f25bf3)

### Find what you are looking for - Search by topic

- [203K Loan Info (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/203k-loan-info)
- [Advantages of Design/Build (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/advantages-of-designbuild)
- [Aging In Place (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/aging-in-place)
- [Allowances (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/allowances)
- [Books for Contractors (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/books-for-contractors)
- [Breaking $1Million (13)](https://www.shawnmccadden.com/the-design-builders-blog/topic/breaking-1million)
- [Building Relationships (13)](https://www.shawnmccadden.com/the-design-builders-blog/topic/building-relationships)
- [Business Considerations (15)](https://www.shawnmccadden.com/the-design-builders-blog/topic/business-considerations)
- [Business Financials (30)](https://www.shawnmccadden.com/the-design-builders-blog/topic/business-financials)
- [Business Growth (43)](https://www.shawnmccadden.com/the-design-builders-blog/topic/business-growth)
- [Business Management (17)](https://www.shawnmccadden.com/the-design-builders-blog/topic/business-management)
- [Business Planning (42)](https://www.shawnmccadden.com/the-design-builders-blog/topic/business-planning)
- [Careers in Construction (13)](https://www.shawnmccadden.com/the-design-builders-blog/topic/careers-in-construction)
- [Cash Flow (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/cash-flow)
- [Contractor Training (14)](https://www.shawnmccadden.com/the-design-builders-blog/topic/contractor-training)
- [Contracts (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/contracts)
- [Craftsmanship (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/craftsmanship)
- [Creating Referrals (16)](https://www.shawnmccadden.com/the-design-builders-blog/topic/creating-referrals)
- [Culture (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/culture)
- [Customer Relations (38)](https://www.shawnmccadden.com/the-design-builders-blog/topic/customer-relations)
- [Defining Design/Build (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/defining-designbuild)
- [Definitions (12)](https://www.shawnmccadden.com/the-design-builders-blog/topic/definitions)
- [Design Options (12)](https://www.shawnmccadden.com/the-design-builders-blog/topic/design-options)
- [Design Trends (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/design-trends)
- [Design/Build Process (7)](https://www.shawnmccadden.com/the-design-builders-blog/topic/designbuild-process)
- [Dietz Lawsuit Related (11)](https://www.shawnmccadden.com/the-design-builders-blog/topic/dietz-lawsuit-related)
- [Differentiating your Business (68)](https://www.shawnmccadden.com/the-design-builders-blog/topic/differentiating-your-business)
- [Earning More Money (33)](https://www.shawnmccadden.com/the-design-builders-blog/topic/earning-more-money)
- [Effects of the RRP Rule (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/effects-of-the-rrp-rule)
- [Employee Advancement (9)](https://www.shawnmccadden.com/the-design-builders-blog/topic/employee-advancement)
- [Employee Relations (3)](https://www.shawnmccadden.com/the-design-builders-blog/topic/employee-relations)
- [Enforcement and Inspections (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/enforcement-and-inspections)
- [EPA Announcements (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/epa-announcements)
- [EPA RRP Lead Rules (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/epa-rrp-lead-rules)
- [EPA RRP Rule Updates (3)](https://www.shawnmccadden.com/the-design-builders-blog/topic/epa-rrp-rule-updates)
- [Estimating (9)](https://www.shawnmccadden.com/the-design-builders-blog/topic/estimating)
- [Estimating Considerations (24)](https://www.shawnmccadden.com/the-design-builders-blog/topic/estimating-considerations)
- [Financial Related Topics (41)](https://www.shawnmccadden.com/the-design-builders-blog/topic/financial-related-topics)
- [Free Stuff (3)](https://www.shawnmccadden.com/the-design-builders-blog/topic/free-stuff)
- [Fun Stuff (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/fun-stuff)
- [Future of the Remodeling Industry (9)](https://www.shawnmccadden.com/the-design-builders-blog/topic/future-of-the-remodeling-industry)
- [Generation Y (8)](https://www.shawnmccadden.com/the-design-builders-blog/topic/generation-y)
- [Government Regulations (17)](https://www.shawnmccadden.com/the-design-builders-blog/topic/government-regulations)
- [Green Considerations (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/green-considerations)
- [Guest Blogs (72)](https://www.shawnmccadden.com/the-design-builders-blog/topic/guest-blogs)
- [Hiring and Firing (18)](https://www.shawnmccadden.com/the-design-builders-blog/topic/hiring-and-firing)
- [How You Do Business (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/how-you-do-business)
- [Insurance Considerations (15)](https://www.shawnmccadden.com/the-design-builders-blog/topic/insurance-considerations)
- [Job Costing Considerations (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/job-costing-considerations)
- [Keeping More Money (13)](https://www.shawnmccadden.com/the-design-builders-blog/topic/keeping-more-money)
- [Labor Costs (9)](https://www.shawnmccadden.com/the-design-builders-blog/topic/labor-costs)
- [LBM Dealer Topics (5)](https://www.shawnmccadden.com/the-design-builders-blog/topic/lbm-dealer-topics)
- [LBM Related Topics (8)](https://www.shawnmccadden.com/the-design-builders-blog/topic/lbm-related-topics)
- [Lead Carpenter System (11)](https://www.shawnmccadden.com/the-design-builders-blog/topic/lead-carpenter-system)
- [Lead Generation (16)](https://www.shawnmccadden.com/the-design-builders-blog/topic/lead-generation)
- [Lead Test Kits and Testing (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/lead-test-kits-and-testing)
- [Leadership (14)](https://www.shawnmccadden.com/the-design-builders-blog/topic/leadership)
- [Legal Considerations (11)](https://www.shawnmccadden.com/the-design-builders-blog/topic/legal-considerations)
- [Legal Related (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/legal-related)
- [Letters to send to Politicians (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/letters-to-send-to-politicians)
- [MA CSL Related (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/ma-csl-related)
- [MA HIC Regulations (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/ma-hic-regulations)
- [Managing Allowances (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/managing-allowances)
- [Margin and Markup (14)](https://www.shawnmccadden.com/the-design-builders-blog/topic/margin-and-markup)
- [Marketing (27)](https://www.shawnmccadden.com/the-design-builders-blog/topic/marketing)
- [Marketing Considerations (28)](https://www.shawnmccadden.com/the-design-builders-blog/topic/marketing-considerations)
- [Marketing Ideas (24)](https://www.shawnmccadden.com/the-design-builders-blog/topic/marketing-ideas)
- [Mentoring/Coaching (20)](https://www.shawnmccadden.com/the-design-builders-blog/topic/mentoringcoaching)
- [New Business Realities (25)](https://www.shawnmccadden.com/the-design-builders-blog/topic/new-business-realities)
- [Opinions from Contractors (17)](https://www.shawnmccadden.com/the-design-builders-blog/topic/opinions-from-contractors)
- [Opinions from Design/Builders (7)](https://www.shawnmccadden.com/the-design-builders-blog/topic/opinions-from-designbuilders)
- [Opt Out Related (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/opt-out-related)
- [OSHA - EPA Challenges (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/osha-epa-challenges)
- [OSHA Considerations (5)](https://www.shawnmccadden.com/the-design-builders-blog/topic/osha-considerations)
- [Paints and Painting (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/paints-and-painting)
- [Personal Protection (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/personal-protection)
- [Plans and Specifications (19)](https://www.shawnmccadden.com/the-design-builders-blog/topic/plans-and-specifications)
- [Pop Quizes (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/pop-quizes)
- [Prequalifying (17)](https://www.shawnmccadden.com/the-design-builders-blog/topic/prequalifying)
- [Production Considerations (32)](https://www.shawnmccadden.com/the-design-builders-blog/topic/production-considerations)
- [Profit Sharing (5)](https://www.shawnmccadden.com/the-design-builders-blog/topic/profit-sharing)
- [Project Meetings (3)](https://www.shawnmccadden.com/the-design-builders-blog/topic/project-meetings)
- [Questions from Visitors (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/questions-from-visitors)
- [QuickBooks Related (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/quickbooks-related)
- [Recruting (19)](https://www.shawnmccadden.com/the-design-builders-blog/topic/recruting)
- [Remodeler Education (12)](https://www.shawnmccadden.com/the-design-builders-blog/topic/remodeler-education)
- [Retirement Planning (12)](https://www.shawnmccadden.com/the-design-builders-blog/topic/retirement-planning)
- [Risk Management (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/risk-management)
- [RRP Related (11)](https://www.shawnmccadden.com/the-design-builders-blog/topic/rrp-related)
- [RRP Training (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/rrp-training)
- [Safety (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/safety)
- [Sage Advice (26)](https://www.shawnmccadden.com/the-design-builders-blog/topic/sage-advice)
- [Sales (17)](https://www.shawnmccadden.com/the-design-builders-blog/topic/sales)
- [Sales Considerations (37)](https://www.shawnmccadden.com/the-design-builders-blog/topic/sales-considerations)
- [Seasonal Opportunities (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/seasonal-opportunities)
- [Self Quizes (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/self-quizes)
- [Selling your Business (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/selling-your-business)
- [Shawn's Predictions (14)](https://www.shawnmccadden.com/the-design-builders-blog/topic/shawn39s-predictions)
- [Social Media for Contractors (6)](https://www.shawnmccadden.com/the-design-builders-blog/topic/social-media-for-contractors)
- [Software Related (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/software-related)
- [Starting a Business (8)](https://www.shawnmccadden.com/the-design-builders-blog/topic/starting-a-business)
- [Statistics (2)](https://www.shawnmccadden.com/the-design-builders-blog/topic/statistics)
- [Subcontractor Considerations (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/subcontractor-considerations)
- [Success Strategies (77)](https://www.shawnmccadden.com/the-design-builders-blog/topic/success-strategies)
- [Taxes (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/taxes)
- [Team Building (14)](https://www.shawnmccadden.com/the-design-builders-blog/topic/team-building)
- [Technology for Remodelers (10)](https://www.shawnmccadden.com/the-design-builders-blog/topic/technology-for-remodelers)
- [Tools and Supplies (4)](https://www.shawnmccadden.com/the-design-builders-blog/topic/tools-and-supplies)
- [Trade Associations (3)](https://www.shawnmccadden.com/the-design-builders-blog/topic/trade-associations)
- [Videos (5)](https://www.shawnmccadden.com/the-design-builders-blog/topic/videos)
- [Violation Reports (1)](https://www.shawnmccadden.com/the-design-builders-blog/topic/violation-reports)
- [Web Site Related (15)](https://www.shawnmccadden.com/the-design-builders-blog/topic/web-site-related)
- [Worker Training (19)](https://www.shawnmccadden.com/the-design-builders-blog/topic/worker-training)
- [Workers Compensation (3)](https://www.shawnmccadden.com/the-design-builders-blog/topic/workers-compensation)
- [Working with Design Professionals (8)](https://www.shawnmccadden.com/the-design-builders-blog/topic/working-with-design-professionals)
- [Working with Vendors (5)](https://www.shawnmccadden.com/the-design-builders-blog/topic/working-with-vendors)

[![accounting blogs](http://logos-pictures.s3.amazonaws.com/byn-badge.png)](http://buildyournumbers.com/top-accounting-blogs/)

Take [QuickBooks Classes](http://buildyournumbers.com/) at BuildYourNumbers.com

### Most Popular Posts

### Straight Forward Information and Advice

***"Finally a site where I get the information I have been looking for!!"***

**Allen A. Reed  
Al Reed Builders**

 

***"I always read your blogs Shawn. You pack of ton of great data into a very concise and understandable format"***

**David Supple  
New England Design and Construction**

 

***"Been following you for years Shawn! You've always offered very valuable information and personal reflection related to our industry. Thanks!"***

****Peter Robinson  
Peter A. Robinson Remodeling LLC****

** **