I co-own a small IT business with 2 other individuals. The way our practice is set up is that we charge our clients certain rates. We invoice at the end of the month.
Originally we took 30% off each invoice to give to the business, then 70% of the invoice was to be distributed throughout the owners. The catch is, we time stamp everything and log who works on what, and for what time to receive a time proportion on their value of their work. Then that gets calculated with the 70% split to determine payout. Well this method didn't work. It left too little for the business.
New method we tried: Month-end statements. Instead of taking off 30% from each invoice, we did one large lump-sum based on all of the revenue for the current month. We then calculated it from the monthly net revenue because it supposedly ensured that we start each month with more than we ended the last month with.
Running the formulas with the new plan, yields less disbursement proportional to the work that was done.
Any ideas on how to properly to disbursements for 3 co-owners who's share depends on essentially:
((PersonalHoursWorked) / (TotalHoursWorked)) = PercentageOfWork
RevenueAfterSavings * PercentageOfWork = Distribution
Any thoughts would be amazing!