Employee Ownership in the Eyes of Exit Planning
mernzen
Fri, 10/21/2022 – 08:00
October is Employee Ownership Month and according to the National Center of Employee Ownership (NCEO), this month is dedicated to the celebration of the “undeniable benefits that employee ownership provides to employees, companies, local communities, and the nation.”
As leaders in the Exit Planning space, we felt a responsibility to touch on this subject as employee ownership is a piece in the larger picture that is Exit Planning. Employee ownership has piqued the interest of many business owners, and it is worth exploring and gaining a clear understanding of how it serves as one exit path that an owner could choose.
As is true with any exit path that is chosen, calling upon experts is crucial in implementing a successful business transfer. There are a variety of unique benefits and challenges that come with an employee ownership transition. Partnering with employee ownership experts can help you best identify candidates, determine the feasibility for your business owner clients, and monitor the changing market.
The Employee Ownership Market
As the modern-day business landscape is ever-changing, many are unaware of what piece employee ownership has in the pie when it comes to types of business models in the U.S.
As detailed by NCEO in an article based on 2019 data, there are over 14 million U.S.participants on ESOPs, with just over 10 million that are actively employed and covered by ESOPs. A majority of privately-held ESOPs are S corporations, represented largely by service and manufacturing organizations.
Another statistic that shows market growth for employee ownership is that according to the NCEO, an average of 250 new ESOPs have been created each year since 2014. However, the total number of active ESOPs has been on a slight decline in recent years.
Lastly, in a recent BEI webinar presentation, representatives from Project Equity reported on a dramatic shift in the business landscape and exit ath preferences due to generational changes of baby boomer business owners nearing retirement.
Check out the statistics Project Equity shared, plus their take on employee ownership by watching the webinar recording!
