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MMarOO's avatar
MMarOO
Copper Contributor
Feb 25, 2022

Calculating Profit Splits with Additional Rules

I'm trying to calculate the profit split on a job.  The agreement between partners is a 60% profit share for Partner A and 40% profit share for partner B.  However, there is a an additional layer to the agreement - Partner A is guaranteed a minimum of 10% return on the gross value of the project.  This brings in 3 different scenarios, as I outline below.

 

Scenario 1:

A job cost $1mm to complete.  The profit on the job was $100k.  Partner A would get $100k to satisfy his 10% gross value.  Partner B would get $0.  The actual split on the profit is this scenario is A-100% and B-0%, this is because the 10% gross value rule trumps the 60/40 split.

 

Scenario 2:

A job cost $1mm to complete.  The profit on the job was $150k.  Partner A would get $100k to satisfy his 10% gross value.  Partner B would get $50k.  The actual split on the profit is this scenario is A-66% and B-33%.  Partner A gets the 10% gross value rule satisfied, and Partner B get the remaining money - but not more than 40%. 

 

Scenario 3:

A job cost $1mm to complete.  The profit on the job was $250k.  With such a high margin of profit, the 10% gross value is easily met; therefore the 60/40 split is the only rule left to govern the profit share.  So Partner A would get $150k (60%) and Partner B would get $100k (40%).

 

I can lay out the concepts in examples but I can not find a way to create an excel sheet or formula to capture all of the different possible outcomes especially if the $1mm total cost and the profit are both varying.  Any suggestions?

6 Replies

  • Riny_van_Eekelen's avatar
    Riny_van_Eekelen
    Platinum Contributor

    MMarOO As a variant, to the formulae in JU51M3 's schedule you could use:

    =MIN(E3,MAX(D3*10%,E3*60%))

    for the A share, and

    =E3-F3

     for the B share.

    • JU51M3's avatar
      JU51M3
      Copper Contributor

      Hai Riny_van_Eekelen ,

       

      Thanks for the improvement ,the formulae you mentioned is easily understandable and also short tooπŸ‘πŸ‘.

       

       

       

    • MMarOO's avatar
      MMarOO
      Copper Contributor
      JU51M3 Thanks for getting back to me on this. The solution you provided is perfect for the scenario outlined above.

      It's my first time writing in one of these forums and the support from the community is awesome!
      • JU51M3's avatar
        JU51M3
        Copper Contributor

        You're welcome MMarOO ,Keep on posting the community is always  there to support us.

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