So the two Principals of the firm both billed out (each) $350,000 annually
The top architect, under the Principals billed out about $250,000 annually
Then approximately (by the rest of the staff) about $142,000 annually
and add in consultants billings are about $101,000 annually
Bringing a grand total of billed amounts to clients at $1,200,000 roughly
You have annual payroll of about: $965,000
The President of the company decides to hire someone to be the “marketing manager” to sell the website and the newsletter, which have already been proven to be a huge success (note sarcasm). And wants to pay that person $50,000 plus 3% of all advertising and lets assume bonuses. This person does not have billable work, really… just to sell the newsletter, and given how popular and how many years its been making money this is a lot of work (again with the sarcasm). And you budget $40,000 towards a revamped website ($10,000 every other month until July).
So how do you afford to pay this person and this huge project? You fire your top earner… that’s right, you fire one of the people bringing in $350,000 worth of income annually. Not only that, but you also raise salaries and billable rates of all employee’s by 5%. This not only pays for the new person, but it also means there is a significant pay increase for the owner.
The employees may not get bonuses this year. The Profit Sharing plan, can be rewritten now that the Board of Directors is only one person, he can make up the rules as he goes along. The profit sharing is due to go in very soon, so its likely he’s already changed the rules to make this not happen. Lets say he hires his new office manager at $62,000, this is a $10,000 increase in the amount of salary he was paying his last office manager.
I wouldn’t let this guy near my checkbook, he doesn’t seem to understand simple math.