A staggering 80% of owners fail to sell their business even after spending time & money on the sale process. Despite being profitable, these businesses are unattractive acquisition targets to outside buyers who need to achieve a high Internal Rate of Return (IRR).
Employee ownership, through models like ESOPs, EOTs, and Co-ops, is a viable solution for owners who want a competitive exit plan that is often more predictable. These models help many businesses avoid closure, retain jobs, and preserve the founder's legacy. Employee ownership can be a good model for many companies, but it may not be appropriate for all companies or situations:
- Profitability: Employee ownership isn't the right choice for companies that aren't showing a healthy profit and for whom the financing costs aren't feasible given the business's cash flow
- Owner's motivation: Employee ownership might not be a good idea for owners who has many interested third party buyers and wants as much cash as possible for their business right now.