I realized the cold hard truth of my journey of semi self-employment is my boss treats me not as a partner but just as an employee. At 4 am, I am blogging this to help myself remember this painful experience.
Day in day out, he is grilling me for the next project which is psychologically stressful. He wants me to bring new projects or work to the company. If you are lead generator, you need to bring in new lead. He asked me why I don’t seem to have the fire in me and I am not as driven as I should be in this role. The answer deep within me is simple, I do not have a clear idea how I will be compensated.
The little voice within me has being telling me about this issue. Let me run through some of the numbers to explain to you the situation. Based on my employment contract, it is supposed to be 50-50 sharing on net profit.
Project 1 January – March 2019
We executed Project 1 from January to March 2019. The gross profit to firm is USD 150,000. I take an even more extreme calculation. Say I am supposed to be entitled half of USD 150,000 which works out to be USD 75,000 which is equivalent to SGD 101,000 for simplicity sake (FX 1.35).
Next we calculate the SG&A expenses for January to March 2019.
My salary = S$3000 (inclusive of CPF) x 3 = S$9000
My boss’ salary = S$7,700 (inclusive of CPF) x 3 = S$23,100
Account Executive’s salary = S$2,000 (inclusive of CPF) x 3 = S$6,000
Office Rental = S$1,000 x 3 = S$3,000
Travel Expenses = S$5,000
Total SG&A expense = S$46,100
Hence my target commission should be SGD 101,000 – SGD 46,100 = SGD 54,900
What I have received for this project:
April commission SGD 20,000
April CPF from employer SGD 3,400
May commission SGD 5,000
May CPF from employer SGD 850
Salary for January to March = SGD 3000 x 3 = SGD 9000
Total remuneration for this project = SGD 38,250
I am short changed S$16,650 even though I have parked all the SG&A cost under my side. Rightfully, it should be using Gross Profit USD 150,000 less SG&A cost of SGD 46,100 which should entitle me SGD 78,200. I don’t have the typical sense of entitlement, I understand as business owner you have assumed risk and I can take a smaller reward for no risk down but not that drastic.
Project 2 April – May 2019
For Project 2 is a pure fruit of my labor, I chased this job and it was awarded to us on 9/4/2019.
In short, below is the numbers:
Revenue of mobilisation USD 80,000
Revenue of demobilisation USD 80,000
Revenue of main duration of work USD 300,000
Cost of mobilisation USD 80,000
Cost of demobilisation USD 40,000
Cost of main duration of work USD 200,000
Gross profit to the firm is USD 140,000 which works out to be SGD 189,000 based on an exchange rate of 1.35.
My salary = S$3000 (inclusive of CPF) x 2 = S$6000
My boss’ salary = S$7,700 (inclusive of CPF) x 2 = S$15,400
Account Executive’s salary = S$2,000 (inclusive of CPF) x 2 = S$4,000
Office Rental = S$1,000 x 2 = S$2,000
Travel Expenses = S$4,000
Total SG&A expense = S$31,400
Again I take half of the Gross Profit and less all the Expenses = SGD 189,000 / 2 – S$ 31,400 = SGD 63,100 (Just want to take on the expenses on my side of the profit to justify the risk reward)
I asked my boss how much will I get for this project to do a forecast for my personal finance. He told me SGD 20,000.
It is a shortfall of SGD 43,100.
Yes, if you add SGD 20,000 to SGD 38,250 you will get SGD 58,250 which works out to be SGD 11,650 per month for January to May 2019. He is taking me as an employee and feels that SGD 11k/ month from January to May is a very high salary while he pockets more than SGD 200k including his salary.
The ultimate winner in this is the employer. High risk high reward.
Me the employee, low risk lower reward. Stop thinking that this is semi-self employment route, think about your next 5 years, how to launch into something for yourself. Go all in – become fully self-employed and work for yourself.