Employee Ownership Trust – exiting your business whilst leaving a legacy
After many years running the business you founded, you may be ready for a change of direction.
Maybe you are planning your retirement
Or you have decided you’d like to do something different with your life.
Many business owners are kept awake at night by one question:
“How can my entrepreneur story end in a way which allows me to take my value, preserves the good I’ve built up, and looks after the employees?”
Traditional succession planning doesn’t always meet these criteria, but there is a solution that few people are aware of.
Could an Employee Ownership Trust be for you?
Employee ownership is the new and better way of preserving your legacy. It enables:
Passing on control without employees having to raise capital
The owner receiving a fair market value for the business
BUT: An employee-controlled business is not like other businesses. The transition of control needs time and careful planning to build a business that might just last for ever.
Making yourself the least important person in your business
The Employee Ownership Trust allows owners to sell all or part of their business, while ensuring its continuation.
To be able to sell, owners need to make themselves the least important person in the business. That can be extremely challenging, but is the first step in exiting your business whether you follow this approach or any other, as Barry Van Danzig attested to in episodes 16 and 17 of The Retirement Café Podcast.
This means the coordinated handing over of control.
Chris Budd chatted to me about Employee Ownership Trusts in episode 23 of The Retirement Café Podcast, released on Tuesday 16th April 2019. He has founded an organisation that helps business owners implement an Emploee Ownership Trust and outlines the steps you need to take:
Decide if EOT is right for you
Engage with your senior team
Discover the true sense of purpose of the business – the flag
Identify the key principles of the business
Be able to prove that the business lives and breathes those principles
Create a culture within the business so that employees will contribute to business decisions
Create engaged and inspired employees
Embed their vision into the business
Sell all or part of your shares at a market value
Create a business focussed on creating long term sustainable profit
And ultimately…
Leave a legacy in the form of an employee owned business
The benefits for you
You’ve worked hard to build your business and you care about your clients and employees. This route allows you to look after both, whilst still extracting the value you’ve seated blood and tears to create.
Your clients continue to be served, your employees continue to be employed and become even more engaged in the business, and you get to retire with the value you deserve from your entrepreneurial efforts.
Chris Budd’s consultancy, The Eternal Business, is a good place to start if this feels like a good option for you.