so the way you structure your pay plan
and your company whether it’s to your
hourly employees or your salary
employees or your executives or
salespeople we determine how much of
your talent you retain and how much you
increase loyalty in your company so this
may not be the most exciting video but
this is a very very very important video
for you to store it doesn’t matter how
many employees you have working for you
right now whether it’s you’re just
getting started you only have a handful
or it’s 20 or it’s 50 100 you got a
couple thousand sales people that are
working for you and executives it’s
something you want to definitely pay
very close attention to so let’s get
right into it in this video I’ll cover
with you different ways you get paid to
your employees and then I also talked to
some strategies on what you could do on
what’s the best to combine with what I
get asked all the time how do I offer
equity do I give this person salary do I
give this person hourly when do I pay
them this I want to bring this guy on
board do I bring them on board now we’ll
cover all that stuff together with you
in this video okay so let’s start off
simplest way is hourly employees now who
are hourly employees hourly employees
are typically people who have a very
simple low skill level job to do for
instance when I worked at haagen-dazs I
was making I had to learn how to make
banana splits right or a sundae
that’s an hourly job you’re making 3
dollars and 25 cents an hour’s what I
was getting paid right if I’m working at
Burger King and I’m making you know a
whopper no onion okay great a whopper no
one your two buns boom this is a very
easy skill set right this is all I’m
doing that’s an hourly four dollars and
25 cents if I work in at the Bob’s Big
Boy and I’m the busboy all I’m doing is
taking all the stuff and I’m bringing
right these are all the jobs that I had
right this is an hourly right so it’s
low skill and it’s just transactional
low skill transactional and it’s a very
great platform for you to identify
people that want to make transitions to
the next level it’s a very very good
filtering system here and by the way
whatever I tell you in this video it’s
very important for you to abide by your
state laws or your country laws wherever
you are from so I’m just telling you
simply stuff that I’ve done but you got
to make sure you’re paying very close
attention to your state human resources
also you got to follow so going back to
it filtering system from here where
people go to the next level it’s also a
great opportunity see who the
hardest-working people here are at the
hourly level front desk clerk well you
know we’ve had somebody who got started
as a front desk clerk and then all of a
sudden she was so amazing that she’s
been with me for 11 years now and she
started making $800 a month initially or
$400 when she was working two days a
week and then next thing you know she’s
been with me she moved in her entire
family and her husband here to Dallas
from LA husband comes two kids come
because but she started off here right
hourly simple salary salary is somebody
that’s more than hourly it’s somebody
that you’re telling them we want you to
get a promotion you are now a salary
position person here in the company and
sometimes salary is going to work more
than 40 hours a week I if I have a job
that I’m working salary you would never
catch me working 40 hours a week and
here’s why if you’re watching us and
you’re working only 40 hours a week as a
salary I like to I like to go above and
beyond because I kind of want to get to
the next level and the next level the
next time and I want to have leverage
when I’m negotiating my salary or
whatever I’m doing by the way my own
employees watch these videos I teach my
own employees how to ask grace from me
every one of them who’s asked for me in
a race I prepped them here’s how you ask
for a raise from me dot-dot-dot and
they’ll come and they’ll present
PowerPoint Pat I believe I deserve this
tell me why pop pop pop nope I disagree
yes I agree one time somebody said I
deserve this I mean get more than data
they deserve and one time somebody asked
me for something I told them no they
didn’t get anything I asked them to
leave so it’s both ways but it’s
transparency so salaries the next level
then you have profits what’s profits
somebody who’s getting paid salary plus
profits why is this important to give
somebody salary plus profits because
salary plus profits allow somebody to
scale like they are willing to work a
little harder and push a little harder
on a Saturday or the effort is paying
attention to more the details and a
rally and everybody because there’s a
profit to participate and this could be
profit slash bonus so you can change
this profit to bonus I’m participating
in a you know tier level bonuses and
profits let me explain here
if you hit XYZ you’re going to get a
$5,000 bonus if you hit ABC you’re going
to get a $10,000 bonus but if you hit
this we’re giving you $25,000 bonus by
the end of the year and then it comes
down to how you put the ABC bonus
together where it could be that you get
a judge and how will you create the
bonuses because the bonuses comes down
to you how creative you can be in that
area to get them to pay attention to
areas that matters the most increase the
value of the company if that’s what
you’re looking for increase the revenues
of the company if that’s what you’re
looking for
increases subscribership of your company
whatever you’re looking for this is a
very important thing to put now if I go
back to the salary the difference
between hourly and salary and salary has
a skill set a Lurie hourly doesn’t
necessarily there’s a skill here there’s
actually a measurable skill set that
this person’s bringing to the table
okay and then you have equity when you
give equity well how equity is
eventually if you want your best
executives to come on board and work
with you and I’m a fan of equity some
CEOs don’t like equity some SEOs prefer
to get profits some employees don’t even
want to equity because equity to them is
long-term
I like equity because equity gets me to
know if this person is a long term
person or short term person if I offer
equity or persons ask me Pat I want a
piece of the company don’t get offended
by that that’s a compliment hey I want
to be with you a long term it’s like a
girl saying when you’re gonna put a ring
on my finger
that’s what equity means if someone says
it to you take it as a compliment don’t
get upset and message me two o’clock in
the morning saying Pat what do I do this
person is asking for equity I think he’s
going to leave me they’re not going to
leave you they’re simply just asking you
what can I do to participate in the
bigger victory long term with this
company because I love this company I
want to participate long term no problem
so that’s the equity part right and
you’ll determine who to give that to
explain to you here in a minute and then
its sales sales is very simple sales is
king without sales nothing exists
without sales nothing exists I put the
crown up here these guys run the entire
show a Google without pay-per-click does
not exist okay Facebook without
fanta what’d he call it the the the the
the advertising and Abu stink doesn’t
exist doesn’t exist that’s sales sheryl
sandberg brought sales to Facebook okay
if there is no sales keller williams
doesn’t exist without their sales people
Gary Keller has built an incredible
organization with nearly I want to say
it’s the ninety thousand real estate
adore they’re the largest real estate
brokerage house in America and he wrote
this book called the one thing
phenomenal book there is nothing with
Jerry Keller Williams if there isn’t
sales nothing sales this king in every
company sales as king so your commission
structure in sales needs to be set up in
a way that you will be judged on how you
set up your commission structure with
your company because if you don’t do it
right then you could potentially
incentivize bad habits that’s on your
comp plan we made this mistake before
myself on the past this is why now a lot
of people call and say Pat cannot come
with your meet with you and have you
help us put a structure a complan I
don’t have time to do it but police
office I don’t have time to do it but
just go back to yourself and think about
the way you setup your comp plan what
behavior do you want me to get that
again goes back to increasing the value
what the company remember how I talked
about bonuses your the profits remember
how I said what behavior do you want
from your salary employee to get them to
do above and beyond same exact thing to
you what behavior do you want for salary
for commissions for them to do very well
and then their comp plan when it comes
down to sales
I don’t like caps on how much money I
can make some companies put caps I’m not
a fan of caps I sit on a few boards and
the some of these guys want to put I
don’t think this person needs to make
more than four hundred thousand dollars
you what if they make more than four
hundred thousand dollars a year whatever
salesperson makes a thousand million
dollars per year what if a salesperson
makes two million dollars per year
that’s totally fine don’t put a cap on
sales my suggestion don’t put a cap on
sales and I know the the logic behind
some people who say I don’t want to I
want to put a cap on Commission sales is
because I don’t think if they if these
guys make too much money they’re going
to leave me and be a competitor of mine
if they don’t
sometimes if they don’t make enough
money they may live in Gobi competitor
of yours so what if that happens I don’t
want to put a limit on this side so
sales is king
the tough thing with sales is King is I
had a company that brought me in and I
spent a full day with them and it was it
was very very painful to be around them
because they’re asking how can we grow
the company and this is a multi-billion
dollar company how can we grow the
company but all we don’t want to change
our comp plan but tell us how can we
grow the company I said first of all
your comp plan is set up in a way to
only favor the salespeople that have
been you for 25 years and they’re not
working they’re not getting off their
asses you’re not moving this company
your entire incentive plan is to get
those guys to just manage your best
salespeople are not selling that is a
terrible compensation plan for your
salespeople but no if we do this they’re
going to leave us to another company let
them leave they’re not going to leave
they’re afraid of working they haven’t
worked a 60-hour workweek in 10-15 years
because your comp plan makes them lazy
the comp plan produces lazy people and
compound produces leaders comp plan
produces managers and complan producers
leader so it’s very very important this
is a there’s an art to how you setup
your comp plan properly where they’re
not breaking the rules but they’re
growing your business so we may come
back to that here in a minute and talk
about it so now let’s talk about it
makes a path so what do I do when I’m
hiring somebody and I kind of want to be
able to know this person saying do i do
salary plus equity do I do this process
that what do I do in this area let me
kind of give you an idea if somebody
says pattern one equity no problem I’ve
had negotiations with many of my
employees that I want equity great so I
want equity I want salary and I want
profits it doesn’t work that way
if you want equity long-term victory
great I like that welcome your salary is
probably going to be alone you’re
probably not going to participate in
profits initial stages obviously at the
end of the day when the company starts
profiting millions on top of millions on
top of millions of dollars it’s a
mathematical formula
you’re gonna participate in profits if
your departments doing their part great
thing about capitalism it’s all math
it’s all math money flows money flows
through and everybody participates if
you can prove I’m having meetings with a
different Department of ours I think
every single department had grown by a
hundred and thirty percent every one of
them had grown by one hundred thirty
percent or more give or take
except for one and I told that one
person we were talking I said you you
don’t have no leverage your department
as a department that has not grown it’s
a measurable number and you know he came
back you’re right I got to work on it
great he’s going to go back and work on
it the feedback was given I’m being
proactive and so instead of being
reactive you’re just waiting for us to
tell you what to do and you’re no longer
being proactive you used to be and
you’re taking a hit and quite frankly
this behavior cannot continue you’re
affecting the entire team fair enough so
you got to have that conversation it’s
not just a one-way Highway both way
highway so if you want low salary you
want to low profits will give you equity
if you want equity you’re going to have
this or somebody says well you know I
want a decent salary but I don’t care
about equity I want to participate
bonuses this year okay so instead of
getting a 40,000 salary you want a
$50,000 your salary but you want to be
able to bonus 20 grand this year no
problem we can work that out but zero
equity great which means that at any
point this person can leave and go
elsewhere or this person may have some
issues tax liens they may have a unpaid
child support payments that they want to
pay off or they have certain debt they
owe to somebody that they just want to
pay it off and they have to fix it now
and you don’t know the whole story they
don’t want to open up and tell you about
it quite frankly that’s fine they’re
motivated by the bonuses right so read
there’s no equity they don’t care for
equity great this person may come and
say I want high salary I don’t care
about bonuses I want to participate in
equity so what’s the difference between
this and this guy because this guy wants
equity but he’s getting low salary this
is when it gets interesting so in the
world of sports in the world of sports
there are salary caps let’s just say
right and you know there’s always this
collective bargaining agreement
they have an NFL and NBA and all this
stuff and they come together and anytime
you hear when there is a what do they
call a lockout they call it a MBA when
no one’s playing and they’re
renegotiating the collective bargaining
agreement there’s a NBA lockout or
something where they’re not playing hey
they’re not playing 30 games okay
because we’re reading a ghost
strike there’s a strike then there’s a
lock area so sometimes as an athlete
sports team you may be sitting there
saying well wait a minute I’m the Cavs
LeBron’s contract is coming up with
Miami listen let’s pay him who cares
right sometimes you’re the Lakers Jerry
Buss and you got a Magic Johnson that’s
coming down from Michigan State and you
know he’s going to be a player and Larry
Bird is coming out he’s going straight
to Boston from Indiana and you’re
bringing Magic Johnson who’s a rock star
you know you got out you got to kind of
participate in Jerry Buss eventually
gave magic 5% of the Lakers and put him
as a VP of operation just vice-president
afterwards some kind of role he played
and so he got equity why because Jerry
Buss Jerry Buss locked in Magic Johnson
Magic Johnson only played for one NBA
team was the Lakers right sometimes you
got to lock in a Kobe Bryant sometimes
you got to lock in your players in the
NFL they call it what do they call it
when they give the franchise tag so a
lot of time quarterbacks will get
franchise tag you can’t leave them or
trade or all that so the company pretty
much has you it’s like saying a
non-compete that you can’t leave and go
to another team great so why would you
consider at a point of doing salary and
equity at the same time in both high
numbers because that talent may be a
solid talent that’s coming on board now
keep this in mind I had somebody to
brought on board that had very very
strong talent but I had a very serious
conversation I said look I can’t afford
a high salary I can’t even afford to
give you profits right now this year but
I’ll give you a long term opportunity
here and I wanted to kind of read the
person and the person agreed and they
came on board and then from there on the
simple question I got to ask is this
how much value did they increase of the
company think about it so the moment
LeBron James went to the Cleveland
Cavaliers the sports franchise went up
three hundred million dollars so you’re
paying to LeBron thirty million a year
LeBron increased the value of your team
by three hundred million dollars was it
worth it think about that for a moment
the moment LeBron left Cleveland the
first time they lost 300 million dollars
in value so this is numbers same when I
come on bring in value two so sometimes
in a marketplace when a Sheryl
Sandberg’s on the market and she’s a
free agent and Mark Zuckerberg wants him
wants her he brings Sheryl Sandberg to
handle the operation side the CEO to
start making money and all this other
stuff for him Sheryl Sandberg today’s
worth 1.5 billion do you know what her
salary was can you take a wild guess
what her salary was when she first came
to Facebook I bet you won’t get it right
it’s not ten million dollars it’s not
five million that’s not a million it’s
not a half a million her first salary
was $300,000 $300,000 but she got stocks
30 million dollars that one equity I
want to be able to take this company
next level she did her 30 million turned
into one and a half billion dollars
whatever the numbers now right why
because she understood I don’t care
about salary I don’t care about profits
I’m going for the big play so you’re
realizing sometimes in the market you
have some talent that you got to work
that out with now for the most part most
companies don’t give salespeople equity
I like to do it I like to do it and we
have a certain program that we do for
that why because I think sales a great
sales manager or sales leader let me
restate that not necessarily sales
manager a great sales leader is very
hard to find very very hard to find and
you got a value your sales sales leaders
you’ve got a value great sales leaders
got a value them a salesperson can come
and go sales leader they know how to
teach other people how to become sales
leaders themselves very difficult find
it so this is an idea for you to be
thinking about when you’re hiring
somebody how do I combine what and by
the way a lot of times when you’re
looking at this I’ll go into my last
points here with you a lot of times when
you’re going into
this into this you got to know your own
numbers for instance if I’m given equity
to somebody I’m given equity to somebody
who’s irreplaceable if there’s if you’re
watching this yourself and you are on
the hiring end so you’re the employer
you’re thinking about hiring a employee
or promotion or hourly or equity or an
executive or sales person you got to ask
yourself is this person irreplaceable so
what is he replaceable they have certain
relationships that you need there are
certain contexts that you need them to
be with your long term there are certain
skill set that they have that you need
them to be here there are certain a
capital they’re bringing to the table
that’s a non measurable capital it’s not
necessarily money but the increase the
value the company right you need to
understand that person’s irreplaceable
if you’re on the complete opposite end
and you’re maybe an hourly or salary and
you can are wondering what is your edge
going to be when you’re asking for
profits or equity well you gotta ask
yourself the question are you
irreplaceable because if you’re
irreplaceable then it’s very easy value
can be determined if you’re
irreplaceable if you’re replaceable what
do you want to have you have no leverage
so you’ve got to make sure you’re
replaceable I literally sit down with my
Steam and I tell them you need to become
irreplaceable and you’ll increase the
value you have with me with the
company’s long-term what else working
together if you’re not a replaceable
what are we doing here what are we doing
here you’ve got to be replaceable right
okay so now strategies strategies to be
thinking about number one nobody can
afford I had a guy ask me the other day
Pat there’s this person I want to hire
and man he’s so great I love him but
he’s got kids he’s got husband he’s got
a wife and you know at his last company
they paid him 188 Europe but I know we
got a great opportunity I want to bring
them on board and you know his last
company was a part of when they were
bond he made a half a million dollars
and he’s coming to me out he would
completely change the life of the
company if we came on board that’s okay
how much is your company make last year
what we grossed 1 million dollars
okay what’s your net last year $50,000
so so so what can you afford to pay this
guy I can’t afford $50,000 I see you can
afford $50,000 I say what else can you
give them that said I said what is your
projectory of your company like did you
go from 100
to half a million to a million no what
was the projector it was a slow
processor so have you guys been going
like this no we’ve been going kind of
like this you know that’s not a person
to come and show they’re going from 100
half a million a million 2 million 10
million 40 million this is great
right I want a piece of this in three
years my buyouts going to be four
million dollars I’m interested right but
if it’s like this you don’t have an
argument to get that guy’s a talent it’s
going to consume what are you talking
about and you can give him fifty
thousand dollars while he expenses he’s
36 37 years old he’s got a wife and kids
and a mortgage he’s not going to do it
at $50,000 so you need to know your
numbers you may bring him in on your
advisory board and have him stick run on
the advisory board and you work your
tail off so he sees the projectory then
you say hey you want to come and be the
president now can afford 150 I’m coming
in because he’s following up with the
company now makes sense that’s a
complete difference so but you need to
know your numbers to always keep a
lookout for free agents always always
keep a lookout for free agents we got
the insurance convention coming up next
week I got so many messages from people
telling me Pat you know what can I do to
be part of a VP with your company I want
to work from the home office side I
think I can bring value to your
marketing side or the operations that
all this other stuff I’m always looking
for free agents I’m always looking for
great free agents I mean amazing free
agents why because free agents it’s free
agents you know in the when when when
LeBron is on the trading block so you
got to pick them up this doesn’t happen
all the time when you get some killers
on the trading blocks you got to make
sure you go pick those guys up so always
keep a lookout for trading for free
agents in a marketplace number three
know the marquee for the position you’re
hiring for for instance that’s somebody
that came to me and said well Patrick
you know I want to one day make three
hundred thousand dollars a year with you
I love this guy said really said yes I
said that’ll never happen
why not because the market for what
you’re doing is this oh well I’m going
to go somewhere else I said no problem
take the next two months and you start
looking this is not today this is years
ago take go take a next you know two
months and start looking and he goes
looking and he
comes back and I said so what happened
well yeah I got a lot of offers great
did anybody offer you 300 no oh really
yes so what’s the number well you know
what – I know the number for your
position and I just took the printout
this is your number this is exactly your
number this is exactly your number
stuttering stuttering stuttering did you
talk to other people yes this is your
number I’m willing to pay you this which
which is more than this you’ll be the
highest-paid person at this position but
this is your number for this and it says
all okay great all the service you know
small conversation everything was done
with and we’ve not had a single issue
ever since then so you need to know what
the market value for the position you’re
hiring for the the regular person the
low skill level not as much expertise
and the big shop guy the market value is
going to be higher for this person but
it’s still not dramatic of a difference
we’re talking about so study your market
value for any position you’re hiring for
next learn be willing to customize pay
depending on talent like this whole
thing is you’re going to get judged
based on your creativity on what you can
do when you bring some talent on board
and I’m not talking about sales I get a
lot of sales people that’ll come inside
and they’ll say to me well Patrick let
me tell you when I’m coming up where you
got to do this this this this this for
me because I’m this this great I rarely
rarely do that with anybody that comes
from the outside and why here’s why
because sales people who end up becoming
your best salespeople are the ones that
came and not asking for anything
homegrown they grew you better make sure
you take care of those guys because if
you don’t I will
I’m just telling you right now somebody
else in the marketplace would be more
than glad for that person if they’re a
lawyer of talent the people I want to
work hard they just want a company that
takes cure them you don’t take your your
best sales people somebody else will
okay but learn how to customize it just
try it out you know what take this whole
thing yourself and write on a sheet of
paper and tell yourself you know what if
I did this and I did this and I did that
what if I give them bonus I give this
book what if this guy’s a salesperson
let me see what I can do my compensation
plan to do it this way what if I did
something with our sales guys and they
were able to participate in that what if
I did something myself can we part this
with a little bit of the bonuses what if
I got my hourly guys
figure out who it is and got rid of some
and you know increase some of them he
told them what they need to do in three
just play with this this is very fun
this is this is great because it also
you’re putting the game plan for
yourself on how to get people advancing
on how to get Tallinn to your place in a
last but not least which is very simple
set up a comp plan that incentivizes and
motivates people to be loyal to you and
motivates people to increase their
longevity with you if that makes any
sense
I have depending on how you set up your
pay structures you’re going to get my
loyalty and you’re going to get my
determination to stay with your
long-term it’s the first thing I told
you when I open this video up I talked
about that with you so if you do that
and you’re giving me equity and maybe
there’s a five-year vesting period for
me to stick around for five years but
five years later I’m going to
participate in dot dot dot you’re
getting me to realize and say I want to
be in business with your long-term and
at the same time you also realize which
one the people you have in your company
are long-term people anyways with that
being said so this again I told you this
is not going to be a very very exciting
topic but it is a topic that many of you
that run multi-million dollar businesses
ask me about regularly that you haven’t
challenges with the so you know you can
post any comments or questions you may
have on this on the bottom I’ll try my
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there again subscribe comment question
if you have any thoughts put it on the
bottom thanks for watching everybody take care bye bye
and your company whether it’s to your
hourly employees or your salary
employees or your executives or
salespeople we determine how much of
your talent you retain and how much you
increase loyalty in your company so this
may not be the most exciting video but
this is a very very very important video
for you to store it doesn’t matter how
many employees you have working for you
right now whether it’s you’re just
getting started you only have a handful
or it’s 20 or it’s 50 100 you got a
couple thousand sales people that are
working for you and executives it’s
something you want to definitely pay
very close attention to so let’s get
right into it in this video I’ll cover
with you different ways you get paid to
your employees and then I also talked to
some strategies on what you could do on
what’s the best to combine with what I
get asked all the time how do I offer
equity do I give this person salary do I
give this person hourly when do I pay
them this I want to bring this guy on
board do I bring them on board now we’ll
cover all that stuff together with you
in this video okay so let’s start off
simplest way is hourly employees now who
are hourly employees hourly employees
are typically people who have a very
simple low skill level job to do for
instance when I worked at haagen-dazs I
was making I had to learn how to make
banana splits right or a sundae
that’s an hourly job you’re making 3
dollars and 25 cents an hour’s what I
was getting paid right if I’m working at
Burger King and I’m making you know a
whopper no onion okay great a whopper no
one your two buns boom this is a very
easy skill set right this is all I’m
doing that’s an hourly four dollars and
25 cents if I work in at the Bob’s Big
Boy and I’m the busboy all I’m doing is
taking all the stuff and I’m bringing
right these are all the jobs that I had
right this is an hourly right so it’s
low skill and it’s just transactional
low skill transactional and it’s a very
great platform for you to identify
people that want to make transitions to
the next level it’s a very very good
filtering system here and by the way
whatever I tell you in this video it’s
very important for you to abide by your
state laws or your country laws wherever
you are from so I’m just telling you
simply stuff that I’ve done but you got
to make sure you’re paying very close
attention to your state human resources
also you got to follow so going back to
it filtering system from here where
people go to the next level it’s also a
great opportunity see who the
hardest-working people here are at the
hourly level front desk clerk well you
know we’ve had somebody who got started
as a front desk clerk and then all of a
sudden she was so amazing that she’s
been with me for 11 years now and she
started making $800 a month initially or
$400 when she was working two days a
week and then next thing you know she’s
been with me she moved in her entire
family and her husband here to Dallas
from LA husband comes two kids come
because but she started off here right
hourly simple salary salary is somebody
that’s more than hourly it’s somebody
that you’re telling them we want you to
get a promotion you are now a salary
position person here in the company and
sometimes salary is going to work more
than 40 hours a week I if I have a job
that I’m working salary you would never
catch me working 40 hours a week and
here’s why if you’re watching us and
you’re working only 40 hours a week as a
salary I like to I like to go above and
beyond because I kind of want to get to
the next level and the next level the
next time and I want to have leverage
when I’m negotiating my salary or
whatever I’m doing by the way my own
employees watch these videos I teach my
own employees how to ask grace from me
every one of them who’s asked for me in
a race I prepped them here’s how you ask
for a raise from me dot-dot-dot and
they’ll come and they’ll present
PowerPoint Pat I believe I deserve this
tell me why pop pop pop nope I disagree
yes I agree one time somebody said I
deserve this I mean get more than data
they deserve and one time somebody asked
me for something I told them no they
didn’t get anything I asked them to
leave so it’s both ways but it’s
transparency so salaries the next level
then you have profits what’s profits
somebody who’s getting paid salary plus
profits why is this important to give
somebody salary plus profits because
salary plus profits allow somebody to
scale like they are willing to work a
little harder and push a little harder
on a Saturday or the effort is paying
attention to more the details and a
rally and everybody because there’s a
profit to participate and this could be
profit slash bonus so you can change
this profit to bonus I’m participating
in a you know tier level bonuses and
profits let me explain here
if you hit XYZ you’re going to get a
$5,000 bonus if you hit ABC you’re going
to get a $10,000 bonus but if you hit
this we’re giving you $25,000 bonus by
the end of the year and then it comes
down to how you put the ABC bonus
together where it could be that you get
a judge and how will you create the
bonuses because the bonuses comes down
to you how creative you can be in that
area to get them to pay attention to
areas that matters the most increase the
value of the company if that’s what
you’re looking for increase the revenues
of the company if that’s what you’re
looking for
increases subscribership of your company
whatever you’re looking for this is a
very important thing to put now if I go
back to the salary the difference
between hourly and salary and salary has
a skill set a Lurie hourly doesn’t
necessarily there’s a skill here there’s
actually a measurable skill set that
this person’s bringing to the table
okay and then you have equity when you
give equity well how equity is
eventually if you want your best
executives to come on board and work
with you and I’m a fan of equity some
CEOs don’t like equity some SEOs prefer
to get profits some employees don’t even
want to equity because equity to them is
long-term
I like equity because equity gets me to
know if this person is a long term
person or short term person if I offer
equity or persons ask me Pat I want a
piece of the company don’t get offended
by that that’s a compliment hey I want
to be with you a long term it’s like a
girl saying when you’re gonna put a ring
on my finger
that’s what equity means if someone says
it to you take it as a compliment don’t
get upset and message me two o’clock in
the morning saying Pat what do I do this
person is asking for equity I think he’s
going to leave me they’re not going to
leave you they’re simply just asking you
what can I do to participate in the
bigger victory long term with this
company because I love this company I
want to participate long term no problem
so that’s the equity part right and
you’ll determine who to give that to
explain to you here in a minute and then
its sales sales is very simple sales is
king without sales nothing exists
without sales nothing exists I put the
crown up here these guys run the entire
show a Google without pay-per-click does
not exist okay Facebook without
fanta what’d he call it the the the the
the advertising and Abu stink doesn’t
exist doesn’t exist that’s sales sheryl
sandberg brought sales to Facebook okay
if there is no sales keller williams
doesn’t exist without their sales people
Gary Keller has built an incredible
organization with nearly I want to say
it’s the ninety thousand real estate
adore they’re the largest real estate
brokerage house in America and he wrote
this book called the one thing
phenomenal book there is nothing with
Jerry Keller Williams if there isn’t
sales nothing sales this king in every
company sales as king so your commission
structure in sales needs to be set up in
a way that you will be judged on how you
set up your commission structure with
your company because if you don’t do it
right then you could potentially
incentivize bad habits that’s on your
comp plan we made this mistake before
myself on the past this is why now a lot
of people call and say Pat cannot come
with your meet with you and have you
help us put a structure a complan I
don’t have time to do it but police
office I don’t have time to do it but
just go back to yourself and think about
the way you setup your comp plan what
behavior do you want me to get that
again goes back to increasing the value
what the company remember how I talked
about bonuses your the profits remember
how I said what behavior do you want
from your salary employee to get them to
do above and beyond same exact thing to
you what behavior do you want for salary
for commissions for them to do very well
and then their comp plan when it comes
down to sales
I don’t like caps on how much money I
can make some companies put caps I’m not
a fan of caps I sit on a few boards and
the some of these guys want to put I
don’t think this person needs to make
more than four hundred thousand dollars
you what if they make more than four
hundred thousand dollars a year whatever
salesperson makes a thousand million
dollars per year what if a salesperson
makes two million dollars per year
that’s totally fine don’t put a cap on
sales my suggestion don’t put a cap on
sales and I know the the logic behind
some people who say I don’t want to I
want to put a cap on Commission sales is
because I don’t think if they if these
guys make too much money they’re going
to leave me and be a competitor of mine
if they don’t
sometimes if they don’t make enough
money they may live in Gobi competitor
of yours so what if that happens I don’t
want to put a limit on this side so
sales is king
the tough thing with sales is King is I
had a company that brought me in and I
spent a full day with them and it was it
was very very painful to be around them
because they’re asking how can we grow
the company and this is a multi-billion
dollar company how can we grow the
company but all we don’t want to change
our comp plan but tell us how can we
grow the company I said first of all
your comp plan is set up in a way to
only favor the salespeople that have
been you for 25 years and they’re not
working they’re not getting off their
asses you’re not moving this company
your entire incentive plan is to get
those guys to just manage your best
salespeople are not selling that is a
terrible compensation plan for your
salespeople but no if we do this they’re
going to leave us to another company let
them leave they’re not going to leave
they’re afraid of working they haven’t
worked a 60-hour workweek in 10-15 years
because your comp plan makes them lazy
the comp plan produces lazy people and
compound produces leaders comp plan
produces managers and complan producers
leader so it’s very very important this
is a there’s an art to how you setup
your comp plan properly where they’re
not breaking the rules but they’re
growing your business so we may come
back to that here in a minute and talk
about it so now let’s talk about it
makes a path so what do I do when I’m
hiring somebody and I kind of want to be
able to know this person saying do i do
salary plus equity do I do this process
that what do I do in this area let me
kind of give you an idea if somebody
says pattern one equity no problem I’ve
had negotiations with many of my
employees that I want equity great so I
want equity I want salary and I want
profits it doesn’t work that way
if you want equity long-term victory
great I like that welcome your salary is
probably going to be alone you’re
probably not going to participate in
profits initial stages obviously at the
end of the day when the company starts
profiting millions on top of millions on
top of millions of dollars it’s a
mathematical formula
you’re gonna participate in profits if
your departments doing their part great
thing about capitalism it’s all math
it’s all math money flows money flows
through and everybody participates if
you can prove I’m having meetings with a
different Department of ours I think
every single department had grown by a
hundred and thirty percent every one of
them had grown by one hundred thirty
percent or more give or take
except for one and I told that one
person we were talking I said you you
don’t have no leverage your department
as a department that has not grown it’s
a measurable number and you know he came
back you’re right I got to work on it
great he’s going to go back and work on
it the feedback was given I’m being
proactive and so instead of being
reactive you’re just waiting for us to
tell you what to do and you’re no longer
being proactive you used to be and
you’re taking a hit and quite frankly
this behavior cannot continue you’re
affecting the entire team fair enough so
you got to have that conversation it’s
not just a one-way Highway both way
highway so if you want low salary you
want to low profits will give you equity
if you want equity you’re going to have
this or somebody says well you know I
want a decent salary but I don’t care
about equity I want to participate
bonuses this year okay so instead of
getting a 40,000 salary you want a
$50,000 your salary but you want to be
able to bonus 20 grand this year no
problem we can work that out but zero
equity great which means that at any
point this person can leave and go
elsewhere or this person may have some
issues tax liens they may have a unpaid
child support payments that they want to
pay off or they have certain debt they
owe to somebody that they just want to
pay it off and they have to fix it now
and you don’t know the whole story they
don’t want to open up and tell you about
it quite frankly that’s fine they’re
motivated by the bonuses right so read
there’s no equity they don’t care for
equity great this person may come and
say I want high salary I don’t care
about bonuses I want to participate in
equity so what’s the difference between
this and this guy because this guy wants
equity but he’s getting low salary this
is when it gets interesting so in the
world of sports in the world of sports
there are salary caps let’s just say
right and you know there’s always this
collective bargaining agreement
they have an NFL and NBA and all this
stuff and they come together and anytime
you hear when there is a what do they
call a lockout they call it a MBA when
no one’s playing and they’re
renegotiating the collective bargaining
agreement there’s a NBA lockout or
something where they’re not playing hey
they’re not playing 30 games okay
because we’re reading a ghost
strike there’s a strike then there’s a
lock area so sometimes as an athlete
sports team you may be sitting there
saying well wait a minute I’m the Cavs
LeBron’s contract is coming up with
Miami listen let’s pay him who cares
right sometimes you’re the Lakers Jerry
Buss and you got a Magic Johnson that’s
coming down from Michigan State and you
know he’s going to be a player and Larry
Bird is coming out he’s going straight
to Boston from Indiana and you’re
bringing Magic Johnson who’s a rock star
you know you got out you got to kind of
participate in Jerry Buss eventually
gave magic 5% of the Lakers and put him
as a VP of operation just vice-president
afterwards some kind of role he played
and so he got equity why because Jerry
Buss Jerry Buss locked in Magic Johnson
Magic Johnson only played for one NBA
team was the Lakers right sometimes you
got to lock in a Kobe Bryant sometimes
you got to lock in your players in the
NFL they call it what do they call it
when they give the franchise tag so a
lot of time quarterbacks will get
franchise tag you can’t leave them or
trade or all that so the company pretty
much has you it’s like saying a
non-compete that you can’t leave and go
to another team great so why would you
consider at a point of doing salary and
equity at the same time in both high
numbers because that talent may be a
solid talent that’s coming on board now
keep this in mind I had somebody to
brought on board that had very very
strong talent but I had a very serious
conversation I said look I can’t afford
a high salary I can’t even afford to
give you profits right now this year but
I’ll give you a long term opportunity
here and I wanted to kind of read the
person and the person agreed and they
came on board and then from there on the
simple question I got to ask is this
how much value did they increase of the
company think about it so the moment
LeBron James went to the Cleveland
Cavaliers the sports franchise went up
three hundred million dollars so you’re
paying to LeBron thirty million a year
LeBron increased the value of your team
by three hundred million dollars was it
worth it think about that for a moment
the moment LeBron left Cleveland the
first time they lost 300 million dollars
in value so this is numbers same when I
come on bring in value two so sometimes
in a marketplace when a Sheryl
Sandberg’s on the market and she’s a
free agent and Mark Zuckerberg wants him
wants her he brings Sheryl Sandberg to
handle the operation side the CEO to
start making money and all this other
stuff for him Sheryl Sandberg today’s
worth 1.5 billion do you know what her
salary was can you take a wild guess
what her salary was when she first came
to Facebook I bet you won’t get it right
it’s not ten million dollars it’s not
five million that’s not a million it’s
not a half a million her first salary
was $300,000 $300,000 but she got stocks
30 million dollars that one equity I
want to be able to take this company
next level she did her 30 million turned
into one and a half billion dollars
whatever the numbers now right why
because she understood I don’t care
about salary I don’t care about profits
I’m going for the big play so you’re
realizing sometimes in the market you
have some talent that you got to work
that out with now for the most part most
companies don’t give salespeople equity
I like to do it I like to do it and we
have a certain program that we do for
that why because I think sales a great
sales manager or sales leader let me
restate that not necessarily sales
manager a great sales leader is very
hard to find very very hard to find and
you got a value your sales sales leaders
you’ve got a value great sales leaders
got a value them a salesperson can come
and go sales leader they know how to
teach other people how to become sales
leaders themselves very difficult find
it so this is an idea for you to be
thinking about when you’re hiring
somebody how do I combine what and by
the way a lot of times when you’re
looking at this I’ll go into my last
points here with you a lot of times when
you’re going into
this into this you got to know your own
numbers for instance if I’m given equity
to somebody I’m given equity to somebody
who’s irreplaceable if there’s if you’re
watching this yourself and you are on
the hiring end so you’re the employer
you’re thinking about hiring a employee
or promotion or hourly or equity or an
executive or sales person you got to ask
yourself is this person irreplaceable so
what is he replaceable they have certain
relationships that you need there are
certain contexts that you need them to
be with your long term there are certain
skill set that they have that you need
them to be here there are certain a
capital they’re bringing to the table
that’s a non measurable capital it’s not
necessarily money but the increase the
value the company right you need to
understand that person’s irreplaceable
if you’re on the complete opposite end
and you’re maybe an hourly or salary and
you can are wondering what is your edge
going to be when you’re asking for
profits or equity well you gotta ask
yourself the question are you
irreplaceable because if you’re
irreplaceable then it’s very easy value
can be determined if you’re
irreplaceable if you’re replaceable what
do you want to have you have no leverage
so you’ve got to make sure you’re
replaceable I literally sit down with my
Steam and I tell them you need to become
irreplaceable and you’ll increase the
value you have with me with the
company’s long-term what else working
together if you’re not a replaceable
what are we doing here what are we doing
here you’ve got to be replaceable right
okay so now strategies strategies to be
thinking about number one nobody can
afford I had a guy ask me the other day
Pat there’s this person I want to hire
and man he’s so great I love him but
he’s got kids he’s got husband he’s got
a wife and you know at his last company
they paid him 188 Europe but I know we
got a great opportunity I want to bring
them on board and you know his last
company was a part of when they were
bond he made a half a million dollars
and he’s coming to me out he would
completely change the life of the
company if we came on board that’s okay
how much is your company make last year
what we grossed 1 million dollars
okay what’s your net last year $50,000
so so so what can you afford to pay this
guy I can’t afford $50,000 I see you can
afford $50,000 I say what else can you
give them that said I said what is your
projectory of your company like did you
go from 100
to half a million to a million no what
was the projector it was a slow
processor so have you guys been going
like this no we’ve been going kind of
like this you know that’s not a person
to come and show they’re going from 100
half a million a million 2 million 10
million 40 million this is great
right I want a piece of this in three
years my buyouts going to be four
million dollars I’m interested right but
if it’s like this you don’t have an
argument to get that guy’s a talent it’s
going to consume what are you talking
about and you can give him fifty
thousand dollars while he expenses he’s
36 37 years old he’s got a wife and kids
and a mortgage he’s not going to do it
at $50,000 so you need to know your
numbers you may bring him in on your
advisory board and have him stick run on
the advisory board and you work your
tail off so he sees the projectory then
you say hey you want to come and be the
president now can afford 150 I’m coming
in because he’s following up with the
company now makes sense that’s a
complete difference so but you need to
know your numbers to always keep a
lookout for free agents always always
keep a lookout for free agents we got
the insurance convention coming up next
week I got so many messages from people
telling me Pat you know what can I do to
be part of a VP with your company I want
to work from the home office side I
think I can bring value to your
marketing side or the operations that
all this other stuff I’m always looking
for free agents I’m always looking for
great free agents I mean amazing free
agents why because free agents it’s free
agents you know in the when when when
LeBron is on the trading block so you
got to pick them up this doesn’t happen
all the time when you get some killers
on the trading blocks you got to make
sure you go pick those guys up so always
keep a lookout for trading for free
agents in a marketplace number three
know the marquee for the position you’re
hiring for for instance that’s somebody
that came to me and said well Patrick
you know I want to one day make three
hundred thousand dollars a year with you
I love this guy said really said yes I
said that’ll never happen
why not because the market for what
you’re doing is this oh well I’m going
to go somewhere else I said no problem
take the next two months and you start
looking this is not today this is years
ago take go take a next you know two
months and start looking and he goes
looking and he
comes back and I said so what happened
well yeah I got a lot of offers great
did anybody offer you 300 no oh really
yes so what’s the number well you know
what – I know the number for your
position and I just took the printout
this is your number this is exactly your
number this is exactly your number
stuttering stuttering stuttering did you
talk to other people yes this is your
number I’m willing to pay you this which
which is more than this you’ll be the
highest-paid person at this position but
this is your number for this and it says
all okay great all the service you know
small conversation everything was done
with and we’ve not had a single issue
ever since then so you need to know what
the market value for the position you’re
hiring for the the regular person the
low skill level not as much expertise
and the big shop guy the market value is
going to be higher for this person but
it’s still not dramatic of a difference
we’re talking about so study your market
value for any position you’re hiring for
next learn be willing to customize pay
depending on talent like this whole
thing is you’re going to get judged
based on your creativity on what you can
do when you bring some talent on board
and I’m not talking about sales I get a
lot of sales people that’ll come inside
and they’ll say to me well Patrick let
me tell you when I’m coming up where you
got to do this this this this this for
me because I’m this this great I rarely
rarely do that with anybody that comes
from the outside and why here’s why
because sales people who end up becoming
your best salespeople are the ones that
came and not asking for anything
homegrown they grew you better make sure
you take care of those guys because if
you don’t I will
I’m just telling you right now somebody
else in the marketplace would be more
than glad for that person if they’re a
lawyer of talent the people I want to
work hard they just want a company that
takes cure them you don’t take your your
best sales people somebody else will
okay but learn how to customize it just
try it out you know what take this whole
thing yourself and write on a sheet of
paper and tell yourself you know what if
I did this and I did this and I did that
what if I give them bonus I give this
book what if this guy’s a salesperson
let me see what I can do my compensation
plan to do it this way what if I did
something with our sales guys and they
were able to participate in that what if
I did something myself can we part this
with a little bit of the bonuses what if
I got my hourly guys
figure out who it is and got rid of some
and you know increase some of them he
told them what they need to do in three
just play with this this is very fun
this is this is great because it also
you’re putting the game plan for
yourself on how to get people advancing
on how to get Tallinn to your place in a
last but not least which is very simple
set up a comp plan that incentivizes and
motivates people to be loyal to you and
motivates people to increase their
longevity with you if that makes any
sense
I have depending on how you set up your
pay structures you’re going to get my
loyalty and you’re going to get my
determination to stay with your
long-term it’s the first thing I told
you when I open this video up I talked
about that with you so if you do that
and you’re giving me equity and maybe
there’s a five-year vesting period for
me to stick around for five years but
five years later I’m going to
participate in dot dot dot you’re
getting me to realize and say I want to
be in business with your long-term and
at the same time you also realize which
one the people you have in your company
are long-term people anyways with that
being said so this again I told you this
is not going to be a very very exciting
topic but it is a topic that many of you
that run multi-million dollar businesses
ask me about regularly that you haven’t
challenges with the so you know you can
post any comments or questions you may
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