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When should a business owner start succession planning?

Succession planners often recommend planning begin 5 years in advance of the anticipated exit. However, there is no hard rule for this, and a successful exit can occur within a year, sometimes less.

When is the best time to sell my business?

The optimal time to sell a business is when it is performing strongly, has a capable management team in place, and the founder is prepared to transition out - ideally with a 12-month runway to execute the sale process effectively.

What is employee ownership?

Employee ownership means a company’s employees own a meaningful share of it, directly or through a trust. The main US forms are an employee stock ownership plan (ESOP), an Employee Ownership Trust (EOT) and a worker cooperative. A sale to employees is one exit path, alongside a family transfer or a sale to an outside buyer.

Why haven't I heard about employee ownership before now?

Most advisors and succession planners are either unaware of EO or misunderstand it. Sometimes supporting owners to pursue other exit-paths better aligns with their incentives. However this is changing and there are many ongoing efforts to raise awareness of EO.

What are the different types of employee ownership?

Employee ownership comes in many varieties including equity compensation, direct share ownership, Employee Stock Ownership Plans (ESOP's) (often for larger companies), worker co-ops and Employee Ownership Trusts (EOT's) (often either works with smaller companies).

What are the motivations of third party buyers?

Strategic buyers are motivated by synergies and long-term strategic benefits, while financial buyers are primarily focused on the financial performance and investment returns of the target company.

Will a third party buyer lay off employees?

Research shows that financial buyers are more likely to lay off employees post-acquisition than strategic buyers.

What advice do business owners who sold to third parties have to offer me?

~ 75% of business founders who sold their company to a third party end up regretting that decision within a year, because of unrealistic expectations about the sale price or not finding the right buyer who was a good fit for the business and could take it to the next level

Why should I consider Employee Ownership instead of selling my business?

Most owners who try to sell never do, even with a profitable business, because outside buyers need a high return. Employee ownership offers a competitive, often more predictable exit that can keep the business open and keep jobs. It may not suit a business without healthy profits, or an owner with many interested buyers who wants the most cash now.

Will the company be more profitable under employee ownership?

EO can enhance company performance, as it creates a closer tie between employee performance and rewards. Employees are effectively “working for themselves,” productivity-reducing conflict is minimized and productivity-enhancing cooperation and innovation encouraged.

When should I pay for a professional valuation?

A professional business valuation is a crucial document in any negotiated sale, and should be commissioned just before negotiations are likely to begin in earnest, whether with an internal (e.g., employees) or external (e.g., strategic or financial) buyer.

Who typically finances an employee ownership sale?

Employee ownership sales are typically financed by a combination of the following options: External lenders Seller financing Employee contributions (In most worker co-op EO sales the employees will put up some equity in the form of a buy-in).

What factors lead to succession team success in business transitions?

Key factors: Identify and develop a qualified internal team, establishing clear career development programs, robust systems to reduce founder dependence, providing transparency and decision-making opportunities to the team, gradually transitioning responsibilities from founder

Can I include my family in an employee ownership sale?

In some firms, the family retains partial ownership alongside the EO to allow for liquidity while still maintaining involvement. Evaluating factors like cash flow, existing debt, management continuity, and getting a professional valuation are all important when considering EO

Will all of my employees become owners if I sell the business to them?

ESOP's are required by regulation (ERISA) to be broad-based For worker co-ops, there is typically a probationary period before which a new hire has the opportunity to apply to become a worker-owner In an EOT, the trustee is a fiduciary agent on behalf of all employees.

How can I find a successor for my business from my existing employees?

Observe and document employees’ skills, leadership qualities, and daily activities to identify potential successors. Share your company vision and goals so potential successors understand the big picture and you can gauge their commitment. Draft future leadership role descriptions to clarify needed skills and guide development efforts. Seek employee feedback on career aspirations and refine your plan accordingly. Involve more team members in decision-making and create incentives (bonuses, profit-sharing, equity) to foster commitment and continuity.

What if I have a partner or family member who isn't ready to sell?

EO is a flexible option with any current ownership structure, and allows selling only a portion of the company to employees over time, maintaining the business's legacy and culture while transitioning ownership gradually.

Will I have to stay with the business after selling it?

Staying with the company post-sale depends on How long you want to remain active How long you expect to continue financially benefiting how critical you are to the day-to-day operation of the business, both in terms of knowledge and/or holding key relationships.

What research evidence supports the impact of employee ownership on worker wealth, business performance, and racial equity?

Employee ownership creates transformative wealth for workers. Research shows ESOP participants accumulate a median of $164,000 vs. $17,000 for typical households. Women of color see 160x-1,435x wealth increases. Employee-owned businesses are 21% more likely to survive, grow 2-3% faster, and have <0.3% loan default rates. With 2.9 million businesses facing succession and only 6% of small businesses aware of EO options, expanding employee ownership represents a major opportunity for worker wealth building and community resilience.

Why Employee-owned Companies Are Better at Building Worker Wealth

Why EO Companies Better Building Worker Wealth

Webinar: Employee Ownership: A Business Succession and Retention Strategy

Owners Journey of Learning about Employee Ownership

Exploring Employee Ownership: Why Business Owners Choose it and what it Could Offer Your Company

Why Owners Choose EO and What it Offers

The Worker Co-Op Solution

Why an owner chose Worker Cooperative over an outside buyer

Three employee ownership models for better jobs

Three employee ownership models for better jobs

It’s Like Planning Your Own Funeral

Long time ESOP skeptic Jay Goltz attended an ESOP seminar that initially caused him anxiety, but ultimately led to clarity that an ESOP is right for his business. He believes an ESOP provides stability and helps employees retire well, without some of the risks that come with selling to an outside buyer. Jay and Shawn discuss whether employees are really "owners" in an ESOP and conclude the messaging should focus more on the benefits of stability and retirement savings. They also note that many accountants and lawyers don't fully appreciate the non-financial reasons entrepreneurs choose ESOPs.

Not Sold on ESOPs? There’s a New Alternative

Owners who chose a Perpetual Purpose Trust instead of ESOP

The Psychology of Ownership and Worker-Owner Productivity

Psychology of Ownership and EO Participant Productivity

Five Ways an ESOP Gives Companies an Edge

Butler Till demonstrates how a 100 percent employee owned ESOP model drives client tenure to 8.9 years compared to the 3 year industry average. By empowering staff to think like owners, the agency improved efficiency by 4600 hours and reduced turnover to 11 percent. This ownership mentality creates a relentless focus on client growth and operational innovation.

3 Key Challenges When Transitioning to Employee Ownership (ESOP, Co-op, EOT)

Transitioning to an Employee Owned Business

The Economics of Organization Structure Changes: A US Perspective on Demutualization

What is Demutualization?

The Case for Employee Ownership: Why philanthropy and government should invest in this powerful business mode

The Case for Employee Ownership

Employee Ownership Statistics 2024: ESOP Wealth Creation and Job Quality Data

EO and ESOP Recent Research

Employee Ownership for Black Workers: Closing the Racial Wealth Gap

The Employee Ownership Trust (EOT): An ESOP Alternative

An ESOP might cost more than $150K to install and $50K annually. An EOT should cost $50K to install and roughly $5K annually.

Trust-Owned Businesses Database

A public, community-curated catalog of U.S. trust-owned businesses maintained by the Purpose Trust Ownership Network (PTON). Tracks Employee Ownership Trusts, Perpetual Purpose Trusts, Long-Term Benefit Trusts, Stewardship Trusts, and related structures across 79 entries — with company size, industry, location, and year of trust formation.

Who Does What in an ESOP Company?

Explains Board of Directors, Management, ESOP Trustee, Plan Administrator, ESOP Committee, ESOP Communications Committee Roles

ESOP Barriers Study: Why Lack of Awareness and Service Provider Expertise Limit Employee Ownership Growth

Barriers to ESOP Creation