Contractor Exit Strategy 6 of 6: Sale to Employees (ESOP)

Contractor Exit Strategy 6 of 6: An ESOP (Employee Stock Ownership Plan) is a qualified defined contribution employee benefit plan designed primarily to invest in the company’s stock.

D. Brown Management Profile Picture
Share

This is a more complex and costly structure to set up and maintain but also comes with some tax advantages. And while these costs and savings are easy to model, they should not be your deciding factor in whether a ESOP should be all or part of your exit strategy.

Succession: Exit Strategy 6 of 6 - Sale to Employees (ESOP).

For starters, this exit strategy should be weighed against a sale to management because all the same prerequisites have to be met, including having strong leadership, an aligned management team, and a business that is continually generating excess cash flow for funding of the deal.  

The big initial questions to really dig into:

  • Will broader employee ownership make the business operate better than having a smaller group of managing owners who carry more of the risk but also have more to gain?
  • Is the culture truly prepared for an ESOP? In a leveraged ESOP, often other contributions to retirement programs and bonuses are cut back which can demoralize a team without the proper education.
  • Will your bank and surety be onboard with an ESOP?

Resources:


Contractor Exit Strategy 6 of 6: Sale to Employees (ESOP)
Continue building value in your business, yourself and your key team members with a good succession strategy....

Contractor Exit Strategy 6 of 6: Sale to Employees (ESOP)
Continue building value in your business, yourself and your key team members with a good succession strategy....

Inspiring Communication as a Leader
JFK used words effectively to reframe mindsets to great effect with lessons all leaders can use. What can you take away from this for your next communication with your team?
Customer Strategy Intersection
Having an effective market strategy is the #1 thing a contractor can do to ensure sustainable and profitable growth. For your strategy brainstorm the following and look for intersections:
Using a Vision to Create Desire and Context for Tasks
There is a whole lot of work involved in building projects and building a construction company. It is easy to get mired down in endless to-do lists, processes, and problems. The thing that holds this all together and accelerates performance is the vision.