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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. Alright, today I want to go into one of the things that I think is the most important part of building a business that can run without you. Because ultimately that's the goal, right? Like all of us have the goal when we own a business, to be able to build it so that the team can run without us as the owners being the one who has to constantly drive it forward and forward and forward, right? Like that's the only way that you can scale, it's the only way that you can build a business that doesn't just become a job for you. So and one of the most important parts of that is designing pay plans, bonus plans, whatever you want to call them, that are aligned with all these things. So that's what I'm going over today, are how I've designed and implemented pay plans and bonus plans and how I think about it in a way that just makes everything work. Okay. And so we have a simple framework that we're going to follow and I'm going to start by drawing a little triangle. Okay? So to make this all work, there's, there's five things we have to do. So it starts with simple. Like the number one thing that any great pay plan or bonus plan has to be is simple in that it's not this, this grid with all these different things and these, these different weights. And there's like, you need a frickin math degree to figure it out. But it's something that's just like, you know, you get 5% of this number, you get 4% of this number. Like you can have very simple grids, but very, very, just like easy simple, you can figure it out on a napkin, right? That is honestly the number one thing that every single great plan is, is it's extremely simple. And I think that is one of the things that most people miss is they just make it way too complicated. Number two that we're looking to do when we design these plans is what I'm say, aligned. Aligned between the company values and the performance of the plan. This is one that I see people mistake a lot. And for example, I have a friend that owns a junk company and they thought it'd be really great if we could align everybody on profitability. And then you take those to the yard, and you get charged on the weight that the things that you bring. So the heavier the stuff, the more you pay, the lower the margins. And the goal was to really get the drivers doing a better job at estimating properly how much it would weigh, basically how much they would bring in. And so they told them the more profitable your routes are, the more money you'll make. Sounds great, right? Sounds like an awesome plan to align them. But what ended up happening was they quickly realized that if they brought less junk to the yard, they would have better margins, right? And so what really happened was they'd go to the side of the road and they would just dump the trash on the side of the road right under the underpass or like in an alleyway or in another businesses, like behind a warehouse. And so all of a sudden, their whole thing was to help the environment, right? We get junk off the streets, and all of a sudden now they're like, they're making it worse and potentially getting themselves into a lot of trouble. If you're caught dumping trash all over the place, especially as a business, and you're like, incentivizing your team to do this. So you have to be really careful when you think about the incentives that you give people and making sure that there's, like, there's always these downhill consequences. And you want to make sure you think through everything because people take shortcuts, right? People are going to want to try to find the easiest, the quickest way. And if that means, like, they could cheat and win, well, like, they're gonna do it or some people are gonna do it at least. All right, number two, lucrative. It has to be, like, I'm gonna say worth the money. Like, if I put a pay plan together that you could earn $5 for doing something, you know, while, like to sell $1,000 thing or $10,000 thing or whatever, it's gonna be like, all right, well, that's like, not worth the money, right? And so you want a plan that, like, people are excited about. Like, a plan that, like, if they do a good job, it is extremely lucrative. Like, I pick that word for a reason. Not just like, oh, it does. Well, like, lucrative is like, man, you can make a lot of money. And in our pay plans, like, our best mechanic last week made $5,000 last week. $5,000. That was his pay for the week. The number two guy made 4,000. The number three guy made, like 3,800. 3,500. 3,300. Multiple people over 3,000 just last week. And so I would describe that as like a pretty lucrative plan, right? And so that's like, really important is that your pay plan, if, if you're, if you want to motivate people for performance, that you give them really good upside to it. And we can talk about what that looks like to be easy to understand. So this goes back to like, the simplicity. Simplicity is like. I think the difference is, like, the simplicity is like, there's not a lot of moving parts. Like, there's only three components, two components, right? That's really simple. Easy to understand is just like they, they, they totally get what it is that they have to do to, to get the results. Like, they understand if I do more of this, I will get that. And those things are aligned with whatever your company goals are. So it's very easy to understand. There's not a rubrics, there's not a, like, form, like Excel sheet. They have to figure all this stuff out and like percentages and this and that. It's super simple, super easy. Anybody could get it right. And then finally it has to be sustainable where I would say long, long last and scales with growth. Because people hate change. All right? And if you change their pay plan, people by default think, you know, you're trying to screw them over. Like, so, so the goal is to like, not change your pay plan. Even if you have the best intentions, even if they can make a lot more money, doesn't matter. The onset is going to be, I'm going to be better off. I'm going to be worse off because of this. And you kind of have to like, prove it the other way. So what I want you to do is think through, is this plan sustainable at multiple levels? So what you do is like just in your Excel sheet, as you start to build these out, just run different scenarios to say, all right, if this guy blows it out of the water and doubles, doubles whatever we're doing now, would I be okay paying that amount of money to them? Right? What if he triples the business? What if next year he doubles the business? The next year he Is, plus another 50% and all of a sudden they're making like a lot, a lot of money. Like, are you going to be good with that now? In my opinion, if I design the plan right, I'm also making a lot more money. So, like, I'm totally fine with that. Like, I want to pay for performance. Listen, you make me money, I'll make, you know, you get paid too. Like, it's a win, win. And so you want it to be Sustainable, because you don't want to design a plan that get somebody paid a bunch of money, maybe in year one. But then you realize, like, oh, man, this is like, I'm paying way too much. Maybe, like, legitimately, you're barely making any more money. Or if not, you could be making less money, depending on how you design it. But then they're making the more. If not, they're making more and more and more. And so all of a sudden you just realized that you designed and rolled out this entire plan that makes it completely upside down. And then the more money you pay them, like, all of a sudden, like, you're burning money every time you do it. I have. Unfortunately, I did a plan like that one. Somebody came to me with an idea. I didn't think it through all the way. It was for, like, a different business. And after three months, we're like, this ain't gonna work. Like, you know, it wasn't sustainable. So all these things, if you like, like the little thing equals sales. Boom. So the framework. If I had my iPad, you'd see a triangle, but it's no big deal. Simple, aligned, lucrative, easy, and sustainable. That is what makes a great pay plan. That. That is the type that I have used to, you know, build my company to. To what it is today is because these are the principles we'd apply. And so we can go ahead and work through a couple examples. So, for example, us, let's go with store manager. Like, store managers. All right. And we got to think about our framework, right? Sales, where our guys get. We have. We have. We do have two different plans. I'm going to go over kind of the base plan, but essentially we set a floor. So the floor for. For most stores are. Is I'm going to say it's like $15,000 of GP a week. So what do we do? We pay on gross profit. Because for us, we don't want to pay on sales because the store managers can influence the gross profit highly. And so they're going to look at their gp. So, yeah, you're looking forward here and about cost of goods. So, yeah, for us, you know, GP equals sales minus cost of goods. Like, we don't include our payroll in that. That number. And so that's the number that we then incentivize them on, which is, you know, growing gross profit. So our plan's pretty simple. It says, hey, if you do between 0 to 15K, you're going to get 2% of the GP, right? If you can do 20, 20K, then you get 3%. If you do 25, you get 4% and you do 30K goes to 5%. So we just take a given week to say, all right, this week they do $18,000. That would fall under. It's less than 20, right? So it falls into this one. So that would be times 2%, which would get them what, 390, I think 360. That would be the bonus, right? If the next week, let's say they get to 22k, right? That would fall them under this one. So they get 3% of that number, right? So 22 times 3, that would get them 660. Let's say they get to 31K, right? That will get them into the 5% bracket and, and so on. And so that would earn them, you know, 15, 15, 50. And so that's the core bonus. Every single week, we just look at how much they did in gross profit dollars and then it falls into one of, you know, one of these tiers and they get paid out the next week. We're week to week. We found that it's, you know, it's easier, there's faster reward, it's aligned. Then we do have another incentive, which is a monthly growth. So our guys get 4% of the GP growth versus last year. So if they can grow, you know, I got some guys that are doing, I don't know, like, let's say 30k plus versus last year, times that by 4%, was that 1200 bucks? So at the end of the month or the first check following the end of the month, they get another twelve hundred dollars. If they grow by nothing, they get nothing. If they're down, they just get. It's nothing. It doesn't, like, charge them against it. That's it. That's the entire plan. So we think about, like, all right, how does this work? Go to my framework, number one, I think it's pretty simple, you know, like, it would be simpler if it was just a straight percentage, right? If our plan was just, hey, you get 3% or 2% of whatever, then that would be simpler. However, the tiers make it more lucrative. And for me, having something that's lucrative that they can make more and more money is more important for driving results than simplicity. And these tiers are really nice because they allow a little bit of extra motivation to get up. Because of my thing. If they do 29, 500, that's less than 30,000. So it's 4%, 1180, and they do 31,000, they get 1500. So all of a sudden that extra little thousand bucks or whatever is going to push them to another 300 hours or so more. And so what we find is that there's a lot of motivation to kind of get over that next one, which is like saying yes to that next customer, calling up with that person who declined to see if we can get back in. There's these things that align, right? Align the values of. We want to create sense of urgency. We want to reward top performers. We want to reward the people that are going to push and win. And then that's why we pay in tiers. And it also makes it more lucrative in terms of sustainability. I mean, we've had this same plan. I mean, I don't. I don't even know the last time I've changed it. It's probably been six years, maybe, maybe more. We haven't changed anything. You know, I could, if I wanted to feel like, hey, I need to, like, bump it a little bit. What I would do is, is we would increase these tiers, right? So maybe we make the floors 18,000, and maybe this is 22, and maybe this is 27 and 32. Like, maybe we. Maybe we increase the brackets so it makes it, like, a little bit. Like, they got to get a little bit higher to get to that next level. But it's been. It's been fine. So anyway, meets all of our criteria. It is what it is.