Are You A Big Biller . . . But A Little W-2'er? (Hilarious Conversation Yesterday) :)

Ever have almost a surreal conversation . . . like you think you're being played while you're holding out for the punchline? Well, I have. This is how it went yesterday in a conversation with my buddy, Borg-Biller:

Me: "Borg-Biller, how ya been? Still Borg-Billin over there at that Big-Box firm?
Borg-Biller: "Yeah, you know me. Billin, billin, billin!"

Me: "Wow, so what's your commission over there?"
Borg-Biller: "Well, I take home 40% up to $250k, 50% after that up to $500k, and then 65% above that."

Me: "Well, I know you've averaged $1 Million USD per year over the last 2 years. So if I do the math, that looks like a W-2 of $550k? And what do the taxes on that look like?"

Borg-Biller: "Yeah, I bring home about $550k on $1 Million USD . . . but Uncle Sam took half of that last year."

Me: "Wow, Uncle Sam took 50% of your take-home last year? Crap, I only paid 18% in total taxes!"
Borg-Biller: "That's impossible."

Me: "No, it's not. It's called owning your own firm and only paying taxes on what's left over after operating expenses."
Borg-Biller: "That's over my head, man."

Me: "So, you've billed $2.5 Million USD for that Big-Box over the last 3 years . . . meaning you have some equity now, right? Surely, you've earned some ownership . . . "
Borg-Biller: "Equity? What do you mean? As far as ownership, I only get that if I purchase stock through our ESOP . . . "

Me: "Borg, let me see if I'm hearing this right. You billed a cool mil . . . only earned commissions on that of $550k . . . and then gave half of your remaining commissions to Uncle Sam? . . . so you gave 45% total to the firm owner, then 50% on what was left over to the government . . . and you have zero ownership in your firm unless you buy it?"
Borg-Biller: "Well, I never thought of it like that . . . but yeah."

Me: "Borg, I like you, so I have to tell you something. I could bill 1/3 of your cool mil, pay significantly less taxes than you . . . actually take home more on my W-2 or Sched-K . . . oh, and by the way, I own the firm!"
Borg-Biller: "That's impossible . . . I think. But either way, being a Big-Biller comes at a cost sometimes!"

Me: "Does it really matter if you're a Big-Biller, but a Little W-2'er?"
Borg-Biller: "Huh?"

Closing Remarks: In the day and age of managing more for stock price than profitability (as the majority of executive comp is tied to stock value and not actually profitable performance), somehow we've missed the boat. There is a huge difference between growing the top-line and growing the bottom. I've seen many cases where organization grows the top (appeasing Wall Street Analysts) . . . only to see little to no benefit on the bottom (you'll see this called, "breaking even on margin.")

Will the day come when Big-Billers are evaluated on their business acumen and what they actually bring home versus what they bill for the firm?

Views: 113

Comment by pam claughton on July 16, 2008 at 1:33pm
If someone is consistently billing around a million, what possible benefit could there be to do it for someone else? What keeps this guy there, vs. going on his own I wonder.
Comment by Joshua Letourneau on July 16, 2008 at 2:23pm
Good question, Pam - I think Borg likes having dedicated sourcers and acct mgrs instead of running a full desk. Because the notion of "Big Billin'" has been associated with being a winner in our space, he can't rationally understand that he'd likely take home more $$$ even though his overall billings would reduce. It's like telling someone that their margins may go up although their total sales may go down . . . it's counter-intuitive.

And let's not forget that if your confidence is more about the prestige associated with Big Billin' than it is what you actually take home . . . well, then you're like the guy that wants to be like the 300-lb 2% bodyfat Mr. Olympia in the musclemag or the 80lb beanstalk model in Cosmo.

Reign me back in here . . . :P
Comment by Claudia Faust on July 16, 2008 at 2:33pm
Just goes to prove that everyone (even recruiters) have non-monetary motivators for choosing where and with whom they work, don't you think? Also, I've found that a person's relationship with risk is another big factor in choosing to recruit independently. Lots to think about when making that decision...
Comment by Joshua Letourneau on July 16, 2008 at 2:54pm
Great points, Claudia. However, in the sake of progress, let's ask you the tough question :P

Will the day come when Big-Billers are evaluated on their business acumen and what they actually bring home versus what they bill for the firm?

If I bill $500k and bring home $450k . . . are my billings any more or less "Big" than the person who bills $1 Mil and brings home $300k? Likewise, if I sell 5 Aston Martins . . . and another salesperson sells 100 Toyotas . . . who reaps the higher margin (despite the lower aggregate revenue)?

And if it's the take-home that really matters in an election year when the Economy is "Issue #1", will Big Billers ever be evaluated on their W-2 or Sched-K instead of annual billings to the firm?

Any thoughts?
Comment by Claudia Faust on July 16, 2008 at 5:54pm
lol - you are too funny with the tough questions, Josh.

But as long as you asked me what I think, I find the question interesting although not terribly relevant in the bigger picture. It is similar to asking if recruiters will ever be evaluated by their results as corporate or third party contributors, and which of those groups makes a more valuable contribution overall. Valuable in what context? To state that revenue generated annually, or percentageof revenue to take-home pay, is "the" measure of recruiting excellence seems monochromatic to me. And while these conversations create interesting diversions for the highly competitive (and yes, I'm one of them), I believe that there are lots of ways to measure recruiting performance and the value proposition it creates for business. Like a gem with many facets however, it really depends on where you're standing to quantify the view.

Just my .02,

Claudia
Comment by Joshua Letourneau on July 16, 2008 at 6:15pm
Good slippery answer, Claudia! :) You have a knack for politics :)

My question is about what makes a "Big Biller" - the overall billings or the overall take-home? Right now, being a "Big Biller" is about billing more in total revenue for a given year . . . meaning the gross, not the net.

Am I making sense? I think I've migrated into oblivion :P
Comment by Claudia Faust on July 16, 2008 at 6:20pm
Well, I suppose if you want to split hairs, "Big Biller" implies that which you invoice and not what you take home. Maybe that's a "Big Paycheck"...
Comment by Joshua Letourneau on July 16, 2008 at 6:23pm
Yes! I want to be a Big-Paychecker! If I'm a Big-Biller, but a little Paychecker, then I've played myself into the Matrix :)
Comment by Chuck Radcliff on July 17, 2008 at 2:50pm
Some people feel that working for a company and not having to deal with overhead and issues. Not everyone is cut out to have their own company. Thank God for that says most small firm owners...

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