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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

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.

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