Forum Discussion
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_EekelenPlatinum Contributor
- JU51M3Copper Contributor
Hai Riny_van_Eekelen ,
Thanks for the improvement ,the formulae you mentioned is easily understandable and also short tooππ.
- MMarOOCopper ContributorRiny_van_Eekelen thanks for your response. The solution you provided works just as well!