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5 Reasons Why an ESOP Leads to Better Business Productivity

Employee Ownership

5 Reasons Why an ESOP Leads to Better Business Productivity

By , November 23, 2020
employee engagement and retention - Succession Plus

Productivity is what every business owner wants, and the best way to increase productivity is to strengthen your employee’s commitment to your business. When designed and implemented properly, an ESOP should be a win for all existing owners, employees, customers and suppliers. Here are 5 reasons why an ESOP leads to better business productivity.

1. Better Employee and Business Alignment:

Better alignment between employees and business owners (because they both own shares in the same company) will ensure a common interest, a focus on common goals (most importantly growing the equity value of the business over time), and a reduction in the typical tension between “us and them.”

2. More Employee Productivity and Efficiency

Employees who are far more engaged and involved in the business are typically more productive and efficient. The academic research says productivity improvements of somewhere between 7% and 23% are common in employee-owned businesses.

3. Generous Tax Concessions

The generous tax concessions which accompany employee share ownership plans in Australia allow employees to earn more (in a more tax-effective way) without costing the company any more money. Therefore the share plan can be used to attract and retain better employees at a pricing advantage in the labour market.

4. Better Staff Retention and Career Pathways

Businesses with a succession plan are typically able to retain staff and provide them with career pathways and opportunities more openly than those without. By nature an employee share plan includes a succession plan; employees are able to purchase equity in the company they work for, and as older employees leave, new employees can “ take their place”. The opportunity for employees to become more involved in corporate governance and senior management roles is also better in employee-owned businesses.

5. More Aligned with Consumer Conscience

Consumer research has also shown that customers are more likely to buy from and are happy to pay a higher price to employee-owned business due to the perception that the quality and service standard will be much higher for employees that own the business. In this case, through the employee share plan, the company has a considerable competitive advantage over competitors.

 

Want to know more about how an ESOP can help your business?

Contact us today and book an obligation-free 30 minute appointment with a Succession Plus adviser to see how we can help you and your business.

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Craig West

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.

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