As a business owner, making decisions comes with the territory. Your day-to-day operations depend on your team’s guidance. Eventually, the day will come when you need to make the important and impactful decision of selling your company.
Whether that day is on the far horizon or right around the corner, selling to an ESOP company could be the win-win solution you’re seeking. For the company there are certain tax advantages, business continuity vehicles, and preservation of legacy structured into the exit strategy. The ESOP benefits for employees can change the trajectory of their career path, wealth building, and retirement.
These are attractive benefits of an ESOP that certainly merit consideration. In addition, selling to an ESOP can support the greater good of the local community — a goal that 84% of ESOP company employees deem as very important.
Looking at selling to an ESOP company through this lens reveals 3 more — and potentially unexpected — ways your decision can positively impact the future.
1. ESOP companies can help stabilize local economies.
Employee-owned companies are generally open to keeping operations local, which strengthens the job infrastructure of the community supporting the business. As a result, there is lower risk of layoffs or corporate relocations that could threaten local economies.
Similarly, during economic downturns ESOP companies tend to be more resilient businesses. This may be at least partially attributable to how the employees’ personal stake in the company’s success motivates them to perform at their best, especially during trying times. The consistency helps keep jobs secure and earnings flowing back into the local economy.
2. ESOP companies can promote community involvement.
ESOP companies are often highly visible and influential in their communities and the surrounding areas. Residents commonly adopt initiatives supported by these employee-owned businesses, cultivating awareness and ongoing engagement with local charities, events, and organizations. This active involvement helps strengthen community ties, build a culture of collaborative growth, and enhance overall community and employee well-being.
3. ESOP companies can empower employee owners for a lifetime.
At its core, an ESOP is a qualified retirement plan that helps employee owners accrue savings without any personal investment. Holding stock shares in the company is a vehicle for building wealth throughout their careers since business profitability is largely tied to their individual and collective performance. Company success increases share value that, in turn, increases retirement savings account balances. Ultimately, those long-term savings translate to greater financial security as employee owners transition to retirement and likely reinvest in their communities.
You’ve worked hard to build your company. Selling it may understandably cause some apprehension. An ESOP is certainly a viable option with benefits that reach beyond your company. What does selling to an ESOP look like? What’s your place in leadership, management, and decision making after the sale? Could an ESOP bring with it a maze of regulatory compliance requirements — and potential issues?
These are all questions you need to ask and deserve to have answered before pursuing an ESOP sale. What to Expect After the Transition to an ESOP Company is a compilation of essential information that will guide your decision making — all in one easy-reference ebook. Download your copy now.
