I am starting a new business. It is a relatively new service. I have hired a young person to work for me full time. She is in charge of introducing this service to the community (including many community leaders),finding new customers who need the service and handling the simpler cases. I will handle the ones needing more advanced help - as well as the existing cases I currently handle with my existing business (which is established and is a traditional industry).
I am paying her salary and benefits totaling about $42,000/yr. This business is in a very new direction which hasn't ever really been offered. We have planned it out and set a course, but there is no guarantee it will be successful. I have told her that if it is successful she will get incentive pay based on the success she has. If it is not successful I will shutter the program and find other work for her to do in my office.
So far it has been six months and it is very slow going. (Part of the problem is the frequent time off she has needed for worthwhile personal issues) I have invested around $50,000 total so far, including her salary.
I expect that, if it works, once she has this service rolling it will produce around $60,000 in revenues per year. The good news is that most of that will be recurring, meaning that the second year it will be roughly $120,000. The third year $180,000, fourth year $240,000 etc. It isn't quite that elegant, but the illustration makes the point well enough.
Before I hired her I was earning $150,000/yr. Once (if) the revenues from her service pick up I will be paying her a bonus roughly equivalent to 10% of the revenues, including the recurring. She will also get baseline salary increases roughly equal to inflation, maybe slightly higher. If it goes well enough I plan to hire more people to do the same service, plus some assistants to help with paperwork and administrative tasks.
So, if you review the math, you can see that it will be around 18-24 months before expenses start to break even. Three to four years to recoup my losses, then finally profit.
I want to avoid the evil perception most people have of those who provide employment to others. My question is -considering the non-guaranteed nature of this endeavor - do you feel this compensation plan is fair to her and others I may hire if the service proves successful? If it is successful then in the future I will have (after expenses) a novel business which pays 25-50% of the revenues to me. DFo you think that is a fair end-goal?
