Make Your Business A Profit Machine

profit-machine

Earlier this week, I asked one of my business mentors to explain how he’s able to keep his company profitable during these challenging economic times. I expected him to rattle off a long list of strategies and tactics, but his answer was simply three words… Incentive Based Pay.

While I’m quite familiar with how sales executive benefit from incentivized “pay for performance” structures, I didn’t understand how this business model could help grow a company during one of the worst recessions ever. So, I pulled out my notepad and asked my mentor to break it down…

Here are five ways incentive based pay can turn your business into a profit machine:

1. It Makes Every Employee Responsible For Growing Your Business- Managers spend too much time micromanaging their teams, instead of giving employes room to grow the piece of the business they’re responsible for. With incentive based pay, each employee gets a modest salary, but their earning potential is really up to them. As employees do their part to grow the company, they are rewarded right away with bonuses based on the amount of revenue they bring back to the company.

2. It Boosts Morale And Unites Everyone Around A Common Goal- Since their salaries are not capped upfront, employees are motivated to bring their A-game to the office everyday, so they can take home bigger checks at the end of the week. This business model gives everyone a vested interest in seeing the company do well, and encourages fresh ideas on how to grow the business.  It also allows managers to focus on training employees to be independent, thinking business leaders who can be trusted to make decisions that are important to the company’s growth. The management role then transforms into more of a cheerleader position, as the CEO is able to spend more of his or her time motivating employees to do their best work.

3. It Drastically Cuts Down Costly Mistakes And Wasteful Spending- Employees are generously rewarded when they bring revenue into the company, but they are also held accountable when their negligence takes money away from the company. When the company is faced with paying unnecessary costs, a portion (if not all of it) is deducted from the paycheck of the employee responsible for the expense. The idea is to get your employees to make common sense decisions about how they spend the company’s money. Encourage them to treat the company’s money as if it were their own money, because it will come out of their paychecks, if they are reckless.

4. It Weeds Out The Weak Performers And Enables Your Best Employees To Shine- Managers don’t have to worry about who’s working and who’s not, because at the end of the day, numbers speak for themselves. If ten people get bonuses and one doesn’t, then you can easily identify your weakest link. Weak performers just want to come to work, do an okay job, and go home– you don’t need people like that when you’re growing a business. Your best employees will come to work with an enthusiastic approach to making money…for the company and for themselves. Remember to make a big deal about your top employees’ performance. Talk about all the bonuses that you are giving out on a regular basis to motivate your team to stay hungry. With incentive based pay, you won’t have to wait for annual reviews to clean house. Those who aren’t getting bonuses will step their game up, or realize that this is not the place for them.

5. It Forces Your Team To Build Stronger Relationships With Your Customers- With your employees focused on making your business a profit machine, they understand the importance of building strong relationships with your customers. Employees, in the incentive based pay structure, are constantly appealing to new customers and trying to up-sell existing clients, so great relationships are necessary for their success. As a result, your team will listen more intently to your customers, understand their needs, and seek new opportunities to service them better. These personal relationships and the special attention your customers receive, will make your business standout, and keep the profits rolling in.

Make your business a profit machine, by putting incentive based pay to work for you.

Be great!

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