How to Create a Highly Effective Compensation Strategy for the General Manager of Your Small Business

by Corey Philip //  September 12, 2022

It’s absolutely vital that you appoint a General Manager within your small business who is up to the task. And in order to attract the best talent, you need to create a highly effective and attractive compensation strategy that covers all bases. 

But what should you include in a compensation strategy for your GM? And how do you work out what’s fair and appropriate? 

In this guide, we explain what you need to think about when developing a compensation strategy for the GM of your small business, so you’re in the best position to attract the talent that you need to help your business grow and evolve.

Begin with the Budget 

Naturally, your first and most important consideration when it comes to determining a compensation package for your GM is affordability. There’s no point in putting together a stunning and ambitious salary package for your general manager if it’s going to bankrupt you in the first year of business. 

However, determining how much to pay your staff is a delicate balancing act as a small business owner. Pay them too much, and you will struggle to stay afloat, but pay them too little, and they will look elsewhere for better remuneration. 

It’s generally accepted that you will have to pay somewhere between 40% and 80% of your business revenue in salaries, and your general manager is likely to take a decent proportion of this. As such, it’s so important that you begin with your sums and understand what your business can afford before you proceed any further, as getting the numbers wrong will be incredibly costly for your small business. 

Consider Compliance Measures 

When you have an idea about what you can afford to pay your general manager, it’s time to consider the various compliance measures that you need to adhere to legally. Your first port of call should be the Fair Labor Standards Act that establishes the legal parameters relating to the following: 

  • Minimum wage: The federal minimum wage is currently $7.25, but most states have their own minimum wage laws that you also need to consider. 

  • Overtime: Overtime pay must be offered for hours worked over forty per workweek at a rate of at least one and half times the rate of regular pay. 

  • Hours worked: Stipulated hours that an employee is typically scheduled to be at the workplace. 

  • Recordkeeping: The employer is responsible for keeping records of employee timesheets and payments. 

  • Child labor: Minors are protected from exploitation in the workplace and are prohibited from working in paid roles. 

When you’re abreast of the compensation package that you can afford, and you’re content that it is legally compliant, you’re ready to conduct some research to find out what other businesses are currently paying their general managers.

Conduct Market Research and Set the Benchmark 

According to Zip Recruiter, the average salary that a General Manager of a small business in the United States can expect to make per year is $61,298, so this is a good place to begin your research. 

But it’s important to realize that there are multiple factors that influence salary, and the data from Zip Recruiter shows a nationwide range of between $21,000 and $114,500 for the role of GM in different small businesses across the country.

Some of the factors you need to consider when deciding on the salary of your GM include: 

  • The sector in which the role operates 

  • Where in the country the position is based 

  • The required skill level and previous experience of the candidate 

  • The hours the GM is expected to work 

  • How much other employees are currently paid within your company 

The more specific you are, the easier it will be to work out the base salary that you’re going to offer your General Manager. You can then proceed to the following section, which considers all of the other aspects that make up an attractive compensation package for the employees of your small business. 

Articulate Rewards & Benefits 

In many respects, working out your GM’s salary is the easiest part of developing the overall compensation package. When you’ve settled on a number, your next job is to decide upon what else to include in the compensation package to ensure it’s an attractive proposition to potential applicants. 

In addition to salary, here’s what you need to think about: 

  • Paid holidays and vacations: The average American worker receives ten days of paid time off each year. But this doesn’t include national holidays, so you will have to specifically mention how many days your GM can expect to have off each year as part of their compensation package.  

  • Sick days: Most states have their own requirements when it comes to sick days. For instance, in California, employers are required to provide a minimum of one hour of paid sick leave for every thirty hours worked. You will need to confirm your state requirements and make the necessary provision within your GM’s compensation package. 

  • Medical, dental, and vision insurance: The Affordable Care Act established the Small Business Health Options Program (for companies with between 1-50 employees) who wish to provide medical, dental, or vision insurance to their employees, so it’s well worth checking out if you want your GM to be insured through the company.

  • Retirement savings: Although it’s by no means a legal requirement, some employers offer 401 (k) retirement savings plans to their employees as part of their compensation packages, which is another way of bolstering the allure of your offer.

You might wish to take the rewards and benefits even further than this when putting together your GM’s compensation package, and some employers are in a position to offer benefits including company cars, childcare, and subsidized training or education. 

Again, it’s so important that you consider the cost implications of all the benefits and rewards that you offer as part of your compensation package, as you don’t want to put your small business under any unnecessary financial strain from the outset. 

Anticipate Raises & Growth Prospects 

A common mistake that small business owners make is failing to plan for raises and the growth prospects of their employees. And if you’re hoping to keep your General Manager in position for the long term, it’s so important to make a provision for future raises. 

If your employee management strategy includes periodical reviews, then you will need to ensure you can reward your General Manager accordingly if they meet or exceed their targets. 

While you don’t need to cover every eventuality, it’s a smart move on your part to include details of potential performance-based raises and growth opportunities when drawing up your compensation package, as it will incentivize your GM when in the post and will make the position more attractive to potential applicants. 

Final Thoughts 

As you can see, there’s so much to consider when it comes to putting together an attractive compensation strategy for the position of General Manager within your small business. We hope that you now have all the information you need to put together the perfect package and attract the right talent to take your small business to the next level. 

About the author

Corey Philip

Corey Philip is a small business owner / investor with a focus on home service businesses.

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