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Profit share

We’re revolutionising the finance sector, and part of that means changing how professional services businesses are run.

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How profit share normally works

🏢 The Big 4

In traditional accounting firms like the Big 4, it’s only the partners who get the profit. You work very hard for ten years or more in the promise of one day getting to enjoy all the profits. Only a very small minority of the workforce enjoy the vast majority of the rewards.

🚀 Start-ups

In a start-up you usually get option schemes that you might one day be able to vest to get a share of the company. All the reward is delayed until a hypothetical future event, like a sale or IPO, that might never happen. Most of the time it’s a lottery ticket that never pays out.

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How the profit share works

We’ve tried to introduce a system that takes the best of each option, along with some other benefits that we’ve added.

1. Everyone benefits, as soon as they join the team. The more senior you are, the more potential you have to shape the company, the more reward you get.

2. You don’t have to wait. The scheme pays out at the end of each year.

Our Net Profit is shared with everyone in the Team at the end of the year, according to Hurdles set at the start of each Financial Year.

Net Profit: This is the total amount earned by the business after accounting for tax and founder remuneration.

Team: Every member of the team not in their notice period.

Hurdles: Set amounts between which profit is shared with the team according to set percentages.

Financial Year: Jan 1 - Dec 31.

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What are the Profit Share Hurdles?

We’ve set hurdles so that the more profit the business makes, the more profit we share with the whole team. Like with ownership (or EMI options) the whole team are incentivized to grow the business and make it more profitable.

Below the first hurdle, no profit is shared with the team.

The first hurdle is set to protect the business from a situation where profits are much, much lower than expected. In this instance, profit is not shared with the team but is retained to protect the business and ensure it can continue to employee the team. This is our priority.

🚧 The first hurdle - 25%

All profits above this hurdle get shared 25% with the team.

🚧 The second hurdle - 50%

As Net Profits go above the second hurdle, everything between the second and third hurdle is shared 50:50 with the team!

🚧 The third hurdle - 75%

Now we are talking. The team gets the lion’s share of the profits above the third hurdle. They’ve earned it! That’s £3 out every £4 earned shared with the team.

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How is each team members share calculated?

💵 Salary levels

Profit share across the team is apportioned according to salary level. This is used as a proxy for seniority. It also avoids having to recalculate again to factor in living costs differential between UK and India / Pakistan.

✅ Eligibility

Everyone in the team is eligible for the profit share from day one. However, anyone on their notice period will not be eligible for their share, which will be split across the remaining team.

We will always priorities those remaining in the team.

🗓 Pro-rating

If you work part time, or only become eligible part way through the period, your pay-out will be pro-rated for the days worked. Seems fair to us.

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So, how much can I expect?

In 2023, the hurdles are set as follows:

Hurdle 1: £100k

Hurdle 2: £250k

Hurdle 3: £400k

So, if the business has Net Profits of £250k, £38k will be shared out across the team.

But if the business does twice as well and has Net Profits of £500k, £188k (4x 🤑) will be shared out across the team.

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FAQs

How does my performance rating factor into this profit share?

We don’t actually have performance ratings.... You might be thinking of a big 4 bonus scheme.

We have an annual

appraisal process⁠

where we review how everyone is doing against our

skills ladder⁠

. If you’re performing really well, you’ll be promoted and so get a big slice of the profit share. Simple.

How can I increase my profit share?

The simplest way... do an amazing job for RORA and get promoted up our

Skills Ladder⁠

But you can also look for ways to ensure we keep growing the business and get paid for all of the work we do.

Do I get the profit share while I’m in probation?

You do! Your profit share accrues from your first day whether you are in probation or not.

Am I eligible for the profit share if I’m on my notice period?

Afraid not. Everyone in the team is eligible for the profit share unless they are on their notice period. We will always priorities those remaining in the team.

Do you only get profit share if you work with partners?

Well spotted. We’ve moved to a single annual profit share for a few reasons:

It’s simpler. Simpler to understand and simpler to administer. Overall we are more efficient and more profitable - everyone wins.

Our business is pretty seasonal (due to holiday taken July-Sep) and so we are less profitable in H2 than H1. This has caused concern and a misalignment in expectations in the past that we’d rather avoid.

We know this means that there is a slightly longer wait between profit pay-outs but overall we think it is worth it.

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