Partnership Models: Profit Sharing Model

Partnership Models

The models for partnership for a consulting firm, educating and grooming in the education sector are given below.

The partnership models are:

  1. Fixed Type- The amount for each partner is fixed. Let us say that the initial amount is 30,000 INR, before starting with a break-even.
  2. Incentive Based- Apart from the base amount say 30,000 INR, the partners also have a variable component based on various criteria mentioned below.

2.1  Profit Sharing- This involved the sharing of the net profits after a month or quarter. Let us say if the profits are 1,20,000 INR, then for each of the n partners, the value is 1,20,000/ n. This is for a company that has matured a lot after break even.

2.2  Sharing Intake Amount- Let us say that there are 4 students, who invest 40,000 INR on an average in our company for grooming. Then, each partner might decide a cap of 10%, and then the shared amount will be for one partner = 10% of 4*40,000 INR. This is applicable for a company that has just broken even.

2.3  Net Sharing Model- If however, the cash backs and discounts are calculated, then the net share will be the percentage of the actual sum of the money of the total students. Let us say that the student avails a discount of 10% from 40,000 INR, then the actual share will be 10% of (100-10)% of 40,000 which is = 3,600 INR. This is highly applicable before break even.

Moreover, some of the addendum that work on these models are:

  1. Risking Penalty- The deductions for each partner is made in this manner. Let us say that the person is not able to be placed in the 60 day time line, and then the decision is made for that student to return some value say 20% in return, then this deduction is subtracted from the actual sum. Let us say that the loss is 20% of 40,000 INR, then the amount 8,000 INR is deducted equally from the partners, or the partners involved in the loss.
  2. Passive Partner Mode- Let us say that the partner breaks a deal of 10 lakhs for a school or college, for 20 students, then the amount of 30% is given to the partner who makes the deal. The rest of the value, 20% is distributed among the passive partners, while the remaining 50% is taken by the company for the operations.
  3. Adjustment Model- However, any additional benefits or any additional loss has to be adjusted from the whole sum, and then distributed equally among partners. These are unforeseen gains or losses.

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