How I Lead My Team (Ownership & Profit-Sharing) | 346

Download my FREE 8-Figure Playbook

This playbook walks through the exact process I used to build from $0 in 2016 to $50M+/year today across multiple franchise brands

Grab it here: https://brianbeers.kit.com/b79cf77012

Let's connect:

Find me on X
Instagram
LinkedIn
YouTube

Transcript

SPEAKER_00 0:00

Welcome back to the Business of Beers Podcast, your daily dose of strategies, tools, and tips to help you build an eight-figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.

SPEAKER_01 0:16

What are my thoughts on employee uh on employee ownership for improving work culture? Yeah, I think it's I think it's a it's it's it's good. I mean what there's a couple different ways this can be done in actual execution. The easiest way, right, is is you do it through like what are called you know some sort of like profit sharing plan, um, where you sh basically have a percentage of of the the company or the store's profits that is then shared with either the manager or the team or however you you design it. Um you know, we do have a plan like this for some of our managers are on this this pay plan where you know there's a set percentage of this of their store's profits that they get uh instead of like the other the other plans. Um for some people it has huge impact, right? They're they really get into more of the numbers, they really start to understand you know the the money coming in and the expenses and this and that. Uh for other people we've had on in the past, it was too stressful. Like, because you know, there there might be a month where I don't know, uh a tree has to get trimmed that's about to fall in the store and it costs $4,000 to take this giant tree down, and like that $4,000 gets charged to the PL, right? And so now their pay is affected because you know it's an expense and it gets, you know, it gets it's it's they're they want to pay the piece of the profit, the upside, they also get paid, you know, when we have expenses, right? So um for some people, they didn't like that component of it and they wanted something simpler. So um I think sometimes it can be really good. I think sometimes it can be uh you know a little stressful, like the but that's like the ups and downs that every every owner goes through. You know, there's actual there's actual ownership, right? So you get somebody who actually gets um so that's like some sort of pay plan, right? So there's you could do some sort of like profit sharing pay plan or profit-driven plan. Uh another level, and there's like a million levels. Like I'm not, this is this is the only ones I'm gonna talk about here, but like there's a million different ways you can slice and dice it. You you would want to keep it as simple as you can. Um but yeah, there's ones where people get uh what's called phantom equity. So it's not real equity, but it's like phantom, and and that's it's like similar in that you know they get uh interest in the profits, but they probably don't have any voting rights, right? But there's like some in the and that there's potentially buyback uh as well um in a phantom-based plan. There, where so someone like says, hey, you get like whatever five percent of these phantom shares, and you know, you work for so long, and then when you leave, like we buy them back, and they're like some predetermined thing. But it's but it's really just like numbers on a spreadsheet. Like it's nothing's nothing's official in terms of any of the like official documents. Um, then you would have like you know, like a real equity plan. Now, a real equity plan means that like the in most of these things, you know, they're gonna become potentially a shareholder. Where or or uh if it's I don't get too complicated, but like if it's an LLC, they're called member, it's called membership units. But um so so now they're somebody who who gets like um you know it's like official. Like they are a shareholder of the company, they have actual real equity in the business. Maybe those shares are given to them as part of their compensation, maybe they buy in. Maybe it's like, hey, the company's worth, you know, one million dollars and you're gonna put in ten thousand dollars and you're gonna get one one percent or whatever, right? Um and those that then those shares could grow in value. It's possible then when they leave, you know, they get bought back, or it's possible you know, the shares can be passed to somebody else. It all depends on what your like rules are. Um, you know, they're gonna get a tax return, they're gonna get a K1. Like it's it's pretty serious. Um you generally don't want to do this unless you have people who are like you're ready to like marry, essentially, right? Like this is pretty serious. Someone's got like equity in the business, uh, it's it's not something that you're gonna like take lightly. You're probably gonna do it only for the people who are at like the top level, like the C-suite in our example. Uh, that's the level that we would start having these conversations with. Um there's another there's another version, it's called an eSOP, which stands for Employee Stock Ownership Plan. Uh that's like a whole thing, but but it's a way that an owner could sell his company and his employees buy it with the help of a bank, uh, is the simplest way to think about it. So, for example, let's say I wanted to sell my company and I didn't want to sell it to private equity for whatever reason. Maybe I decided that um I was afraid that they would whatever, rip it apart. I I would afraid I was afraid of certain things, or nobody wanted to buy it. Like no private equity company wanted to buy it. Maybe I couldn't do it, whatever. Like, but but so another option, and I've seen a number of franchisees, large franchisees do this, is they create an eSOP. And an ESOP works is like you get a valuation on the company, uh, the they can go to the bank. The bank can then basically so say I could sell my company for $10 million or something as an ESOP. Uh they could potentially go to the bank, probably get a loan for like, I don't know, eight, seven million dollars or something like that. I would do a seller carry for three million, right? So like technically I'm out of it. The employees now, uh all all the shares are basically owned by the employees. Uh the ASOP doesn't pay taxes, has no federal tax return. So like, you know, 30% of what we make goes to taxes. So like because they don't have that 30% tax expense, that they have more cash flow, which then can be used to accelerate payments back to the bank, uh, so the bank's like comfortable with it. And then at a certain point, you know, once the bank is paid back and all the debts paid back, uh, then all those future distributions get um accrued in employees like retirement plan, and then when they retire or quit or whatever, uh their shares are bought back with that with that money. And so it's not like a cash flow plan, but it's a um it's it's a more of a retirement plan. And so does it does it work? I mean, I've seen eSops work I mean, I've seen some of them work really well, um, because people like people realized like, you know, hey, if I you know, I you know, it it's it's a long payoff. So like people really have to have their right mindset here. But uh, I mean I've seen multiple esops people double the double their value uh over time because of uh because of everybody getting on board. So anyway, um I think I think it can work. Uh I think a lot of it though, in terms of like does employee ownership work for improving culture, it really comes down to like the owners and their ability to communicate and educate and like uh a lot of people have never seen a PL. They have no idea like sales and cost of goods and payroll and margins and variable costs and fixed costs, and like there's so much that goes into it that uh unless you're committed to educating everybody on it and how it works and the different levers that we can pull and like what you can actually do to affect change, then you know, the the behavior is gonna be the same, which is you know, they're gonna get the PL, they're gonna scroll to the bottom, they're gonna like see what the number is, they're gonna multiply it by whatever, and then uh, you know, they're gonna be like, Oh, did I make money or not? But but to really impact change, you have to have somebody who who thinks about like the whole thing uh and and what they can do. So