Our profit-sharing plan is intended to address the company performance portion of the annual bonus that we’ve shared (in some form) every year since SkyVerge was founded, as it’s important to Justin and Max to share the company’s success with the team. Shout out to Buffer for the inspiration in developing this plan!
We had three goals in mind when developing our plan:
- It should be predictable, transparent, and easily understandable by everyone.
- It should reward tenure with the company more heavily than other components, so the longer that a team member has been with the company, the greater their share. Our team is our greatest asset, and we want to do things as a company that encourage everyone to have long, productive, and happy careers at SkyVerge.
- It should encourage day-to-day actions that make the company more profitable and align those with individual compensation, so when the company makes more, the team makes more, too.
The plan starts with allocating a percentage, in the range of 5 – 15%, of the company’s total profit to the team profit-sharing pool. The percentage is determined towards the end of every year, by reviewing factors like: taxes, the company’s cash balance, and other possible strategic uses for cash (like acquiring a new product). Typically, we’ll always need to allocate about 35-40% of profit to taxes, and 25-50% towards retained earnings.
That pool is shared among the team using a formula with 3 components:
- Base component: 25% of the pool is shared equally with all team members based on the number of full months worked at SkyVerge this year.
- Compensation component: 25% of the pool is shared based on an individual team member’s annual compensation as a percentage of the total annual compensation for the entire company. For those team members that join during a given year, their salary is prorated based on their hire date.
- Tenure component: 50% of the pool is shared based on the total number of months that an individual team member has worked at SkyVerge as a percentage of the combined months of tenure for the entire company.
There are two caveats to this formula:
- Any unpaid leave is deducted from the total number of months for calculating tenure.
- note: parental leave is paid and thus included when calculating tenure.
- Company shareholder-employees are excluded from the plan.
We calculate the profit share amount for each individual team member using the formula above. In mid-December of each year, every team member will get an email from them sharing the amount. If you have any questions about the plan, please reach out to Catherine.
We don’t offer stock equity in the company because equity is only valuable when there are near-term (3-5 year) plans to have an exit (either via a sale to another company or via an IPO) and our goal has always been to sustainably grow the company & team over a long period of time, and not to sell or IPO. That said, we like planning for the unexpected, and so in unlikely event that we sell the company or IPO, here’s what would apply:
If SkyVerge is ever sold or part of an IPO, tenured team members (those who have been a team member for 1 year or greater) will be eligible to receive a portion of 5% of the value of the company. In that event, the 5% would be divided into units, based on the number of team members we have at the time. Team members who were part of the company for less than 1 year would receive 0 units, someone who was with the company for 1 year would receive 1 unit, and so on, until you’re fully vested at 5 years for 5 units.