Approaching Dad With Profit Sharing

Steve is employed his father's plumbing company. He would like to approach his dad about sharing in the profits since it's a small business. What's the best way to bring it up?

QUESTION: Steve in Minnesota is currently employed by a plumbing company owned by his father. He would like to approach his dad about sharing in the profits since it’s a small business. What’s the best way to bring it up? Dave offers him some ideas.

ANSWER: Sit down and tell him you’ve admired him as an entrepreneur running this business. You want to help it bring in some more business and execute that business, meaning get the production done on it. And if you bring more money to the company, how could you structure it where you could participate in the profits you bring in? Let him answer the question. But it could be as simple as if you go get a job and you run the job top to bottom, we run job costing on that job, and what percentage could you have if you did that? Or if you start a new division doing smaller plumbing jobs that you don’t have now and you help your dad build that, how could you participate in the profits of that? You’re not asking him to give you money—except a percentage of what you kill and drag home—that you don’t already have here.

You wouldn’t have to change ownership or anything of that nature. It’s just how you calculate the compensation. None of my people who work here own any stock in the company, and yet a massive percentage of them get paid different ways on the net profits of this place. Our accounting is a bit of a nightmare because I’m always trying to figure out a way to cut somebody in on what they did, starting with a straight commission type mentality, in other words. He doesn’t have to give you ownership. If you’re not part of a particular job, you don’t share in that. I’ve told people around here for years, if you bring in money that I didn’t have coming in anyway because you go do something that’s smart, I’ll share it with you if we arrange it ahead of time. I think that’s pretty doable and especially given that it’s your dad, I think he’d probably be inspired that you’re inspired entrepreneurially. I think it would probably do his heart good to know that you actually care.