Whether your business is in Overland Park or elsewhere, when all is said and done, the only ones who know and care enough about the company may just be your employees. Sound intriguing? If yes, then you need to explore a win-win means through which your employees can become owners.
Have you ever heard of an Employee Stock-Ownership Plan, or ESOP?
ESOPs have been growing in popularity, especially when the market was down and outside buyers were scarce. That said, their popularity has not waned, although ESOPS can be a strange and complicated breed.
Essentially, an ESOP mixes a family exit strategy with a company retirement plan. There is a great deal to it with many layers of protections regarding the operations and management of the business.
Of course, there are some that are wary of the ESOP model. MarketWatch recently featured the ESOP and some criticisms of the approach in an article titled “When founder cash out, do workers lose?” Some of the criticisms are broad generalizations, especially as to the topic of valuation. Other criticisms are well taken.
As the article points out, this does effect the employees by opening them up to some of the risks of actual ownership. Is this a good thing? It can mean a whole new kind of motivation and source of innovation, as many have experienced, but it can also become a tricky game of all-your-eggs-in-one-basket for employees-turned-owners. There is a reason some people have the mettle to be owners and others are content to be employees.
From success stories to criticisms there are many voices talking about the ESOP. The original article is worth reading for due diligence purposes if you are on the employee side of the table. Regardless, an ESOP can be a very special tool for all parties at the table and one worth understanding and, just maybe, putting into force.
For more information about business succession planning in Overland Park, KS, and to download a "special report" on business succession planning along with free tools to help you organize your estate, visit my estate planning website.
Reference: MarketWatch (May 17, 2013) “When founder cash out, do workers lose?”