This document describes how we manage the distribution of the company's profit quarterly.
Profit is distributed at the end of each quarter, based on the company's performance. We believe in donating to good causes and reserve 1% of this profit with the hope of making a big impact on them. The remaining percentage of the profit is split three ways (33% per part) based on how we perceive time: the past, the present and the future.
The profit is paid out if cash reserves are high enough to cover nine months of expenses. We define the required reserves as nine months of the last six months' average expenses.
We also pay out a yearly profit. To "force" ourselves into having a yearly profit, we put a pre-defined amount into a separate account ("profit budget") each month and mark it as an expense. So if we just break zero operationally, we still have some profits to pay from this separate account at the end of the year. The profit from this account is paid out even if the yearly operational profit is negative, but only after we cover cash reserves for nine months of expenses.
This part rewards the people who have previously believed in the company, invested in it, lent money to it, etc. The priority of payouts are as follows:
- Bank loans (to decrease interest rates)
- Business loans
- Founder payouts
This part rewards the work achieved in the past quarter and is a logarithmic points scale based on the length of time working for the company. The calculation of profit-share points for a single Nitean is as follows:
points = months_at_company/log(months_at_company) * (1 - unpaid_vacation_ratio)
The profit share will only be reduced if unpaid vacation time has been used.
The resulting profit-share payout is calculated with this formula:
profit-share = (Nitean's points) / (Total points) * (Available profit)
Profit-sharing payouts are done once every quarter.
This part stays in the company's bank account and is used for investing in the following quarter. This can be discounted prepayments for expenses so we lower our mid-term and long-term costs, paid supervised training from authorities in a field we're interested in, gadgets for research, conference fees and allowances, paid courses etc.
The remaining part of the profit share is what we donate to charities and causes we believe in. Everyone in the company can submit a potential recipient of these donations with the organization getting the most votes receiving the money.
The organization voting takes place at the end of each quarter, with every Nitean casting a vote. There are four votes to cast: three votes worth 1 point and one vote worth 3 points. The list of organizations and the voting tally is kept in a Google spreadsheet (for permanent Niteans only).
The organization with the most total "points" (current quarter plus previous quarters) gets the profit share donation. Then, its points are reset to zero (if the organization wins by more than 1 point, the difference is carried over to the next month). Other organizations keep their points for the next quarter. If there is a tie, the Partners decide the winner.
You can see the organizations we've donated to on the About Niteo page.