With the year coming to a close, it looks like my publishing business will end with a surplus of cash in the bank. It’s pretty close to what I had projected at the beginning of the year so that’s exciting. My question for you is about what to do with that money. It’s the first time in three years that my publishing company has had a surplus. Part of me wants to share it with the employees in the form of a year-end bonus, and part of me wants to put it back into the business.
I want to be as responsible as possible, but I also want to spread the wealth and keep my staff (of about three) motivated for the coming year. I feel guilty about not being able to give them bonuses in previous years. What’s the best way to approach this situation? How should I decide where the money goes?
Congratulations on your surplus! That’s a truly exciting milestone you’ve hit in year three. What’s even more exciting is that you said you had projected you would end with a surplus, and you did. Taking the time to set up your projections was likely a big reason why you ended on such a positive note. Keep up the great work in the new year. Now as far as deciding where the money goes, there are a couple of things to analyze.
First, you had mentioned that this was the first year that you have had a surplus. That being said, I would be very cautious about letting the cash go at this point. Before you consider giving it out, do your projections for the next year or two and see what your cash flow is like. If things still look tight in the coming years you may want to remember that it’s better to have cash to keep the business running than to give it away and have to cutback in the year to come.
Second, you had mentioned that giving bonuses would keep people motivated in the new year. Everyone loves to get more money, but it’s not the main source of motivation for employees. So if you’re approaching this with the mindset that giving cash will guarantee motivation in the new year, be cautious. The reality is that if you want to give a bonus, you should do so without having it tied to any expectation on future performance.
Third, start small. Is it possible for you to offer a small gesture of thanks and keep the majority in the business to grow on in the next year? Remember that it doesn’t have to be all or nothing. Any token or action of gratitude is better than none at this time of year. So, if you look at your numbers and feel like it’s more responsible to keep the majority of the money in the business, get creative and determine what you can give to show your thanks.
Finally, develop your plan for next year. If you do want to give a significant bonus to your staff at the end of the year, work it into your projections like any other expense. That way, when you reach this point next year, you’ll know exactly what you can afford to give and how to proceed.
Again, congratulations and best of luck in 2014!
Holly Howard runs Ask Holly How, a small business consulting company based out of Williamsburg, Brooklyn that works with a wide variety of businesses from restaurants to retail to art studios and pretty much everything in between. Her clients report increased income and profit, decreased expenses and a significantly better quality of life. Holly heads up the Small Business Book Club at McNally Jackson Books.
Want valuable insights into how to grow your business? Email Holly to set up a time to talk at firstname.lastname@example.org or to ask a question for the next Ask Holly How. You can also enroll in her Business Growth program starting Jan. 13.