Why This High-Growth Tech Company Pays Profit Sharing
Building a company takes personal conviction. But you also need a team to give you the perspective and energy to move forward. I feel fortunate to have had many folks in my life who supported me personally and professionally over the years. Now that I have been leading the team at Aha! for nearly a decade, it has been rewarding to meet with other CEOs who are still in the early stages of building their own companies.
I often get questions about how to keep, engage, and reward what is every company’s most valuable asset — the people who work there.
A few weeks ago I met with a founding CEO who wanted guidance and mentorship. They had raised a Series A but were struggling to lead a distributed team with clarity. In particular, they asked about how our team sets goals and stays aligned. They also wanted to know about the profit sharing that everyone who works full-time at Aha! receives.
Bootstrapping and being financially sound has always been an essential part of the Aha! story. We operate the business to put people, performance, and profit first — remembering that to pay profit sharing means you must actually turn a profit. I always point this out when I make an offer to a job candidate.
Our profit-sharing program is a sizable bi-annual payment in addition to salary and retirement contributions. The company's growth and profitability is evidenced by our recent major revenue milestone — Aha! has surged past $100 million in annual recurring revenue.
The CEO I was speaking with wanted to understand why we chose to offer profit sharing from day one and how we think it impacts the business. I shared how it helps focus the team on the overall success of the business and bolsters collaboration since everyone is rewarded for our collective performance. I also explained that we were able to do so with our very first employee because we waited to hire until the company served 125 paying customers.
Profit sharing focuses the collective mind — which is especially important for emerging companies that are bootstrapped.
Profit sharing benefits more established companies too. It is far better than commission structures that reward only a few. And it is healthier than the typical bonus schemes you find at most technology companies. Those programs typically reward someone for their own contribution. My experience has been that commissions and performance-based incentives drive a focus on the self.
A team is made up of individuals, but it is the achievements of the group that drive meaningful success. People also suffer when their manager sets unrealistic goals or when other factors that they could not control impacted their success. So I thought it would be helpful to summarize the benefits of profit sharing for others curious about the model:
Put people and profit first
A business exists to create value. Profit sharing allows a company to live its values in action. You can make the company’s financial performance a shared success that enriches everyone.
Create shared ownership
A business is nothing without its employees. You want the folks on your team to feel like part owners. Profit sharing encourages employee motivation and personal investment.
A business cannot thrive in chaos. Make decisions based on what is best for the company, customers, and the team. Profit sharing leads to accountability for the performance of all teammates.
Retain and attract the best
A business changes over time. As your ambitions grow, so too will your need to inspire others to join your journey. Hiring and nurturing exceptionally talented people is critical. Profit-sharing can be an integral part of your recruitment and retention strategies.
There should always be ways to reward individuals and the entire company for both personal and organizational success.
Of course, there is much more to motivating and inspiring people than money. Most of us want to have clear goals and the space to apply our best effort to achieve. We also want to be acknowledged when we realize our potential. Individuals should be recognized for phenomenal work — both major accomplishments and incremental accomplishments.
This is why you need other ways to spotlight performance. For example, the team leads at Aha! meet with folks 1:1 at least once a week and have a formal check-in on each work anniversary, when annual raises take place. Individuals at Aha! who excel are rewarded when opportunities arise with increased responsibilities, new ways to contribute, and broader roles. This can happen at any time throughout the year.
A business exists to sustainably serve others and create value for everyone. You need free cash flow to do that. You need to be financially sound to thrive and grow. You need the team to treat the company’s money as if it were their own, because it is. There is no room for wasteful or splashy spending.
That is the real benefit of profit sharing for companies that have lasting growth in mind. It fosters a responsible and conscientious mentality — a sense of togetherness that makes the achievement that much sweeter.