Bonus Plans – The Solution

This article is a continuation of “The Do’s and Don’ts of Bonus Plans.” If you haven’t done so yet, we recommend reading the first article to get a better context when reading this one.

So how does one get around this minefield? The following factors must be included in the design of any bonus plan to ensure its success:

  1. Bonuses need to be based on profit, not revenue. To do this, it is crucial that the owner understands how to identify the true expenses in the practice – all of them.
  2. The owner must know what percentage of the profit is correct to distribute to the staff.
  3. The staff must feel that the bonus plan is predictable. This means that bonuses need to be tied to specific stats that can be measured and made known to them, and that the achievement of the targeted goals of those stats ensures that profit has actually been made.
  4. The staff must clearly understand the fact that changes to the bonus level will occur on occasion as the make/break point rises. In this way, when the income level target is raised to account for the increase in the make/break point, they will not become upset.
  5. The staff must feel that they can control the income of the practice so as to ensure they have a chance at getting to the targeted ranges. To do this, as mentioned previously, the owner must place a staff member in charge of each area and develop a statistic to monitor it and then teach the staff member how to control the area so as to keep the stat in the appropriate, targeted range.
  6. The bonus system has to be fair. In other words, it has to reward the staff members who truly contribute to growth, not just because they are merely part of the team.


If all the above seems a bit complicated, that’s because it is… and, then again, it isn’t. You see, items 1 to 6 above are all things that a practice owner should have in place anyway. In other words, regardless of whether or not you have a bonus system established, as an owner you need to:

  • Understand your true make/break point.
  • Understand how to equitably pay staff (whether wages only or bonuses too).
  • Create predictability in the practice.
  • Ensure that staff understands why income level targets for bonuses are raised from time to time.
  • Work with the staff to ensure that they feel their efforts make a meaningful difference to the practice and the team.
  • Ensure that everyone in the practice is carrying his/her own weight and is not being propped up by other staff members.


Every owner should have these points in place in the practice. If you are uncertain on any of the points above, it is crucial that you get educated on them. And once you do, it then becomes easy for you to set up a bonus plan that is effective, motivating and fair for all.

Questions or Comments?