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Maximise the value of your business with an Employee Share Ownership Plan (ESOP)

Employee Ownership

Maximise the value of your business with an Employee Share Ownership Plan (ESOP)

By , December 16, 2019
maximise business value with ESOP

We have all heard the adage that “it’s easy to look good when you are surrounded by a great team”. Equally I have heard many business owners complain or express frustration at the performance and commitment levels displayed by some or all of their employees.

In today’s business environment, how then do we surround ourselves with a great team?

Many factors need to come together to create a great business with a happy and productive culture. One of those contributing factors might be the introduction of an Employee Share Ownership Plan or ESOP. ESOPs are becoming increasingly popular in the UK and USA, and to some degree in Australia as well, for several very good reasons.

From an employer’s perspective, ESOPs can help improve firm culture, lock in your key people and form an integral part of your succession plans.

How then are they viewed from an employee’s perspective? The following results might surprise you.

  1. Financial payoff (68%)
  2. Fair treatment (67%)
  3. A sense of community (59%)
  4. Employee influence on management (42%)
  5. Individual influence on decisions affecting daily work (38%)

(Source: Michelle Brown, Rowan Minson, Ann O’Connell and Ian Ramsay, “Why do employees participate in employee share ownership plans?”, Melbourne University 2011)

While a significant number sited financial benefits as you would expect, lots of respondents highlighted important non-financial reasons for being attracted to participate in an ESOP. Values like being part of a business that treats its people fairly, feeling like they are part of a community, having some influence over management decisions and influencing decisions that affect their daily work environment. If we want to achieve a productive and happy work culture, surely these are attributes that are more than likely to be present.

An ESOP on its own will not achieve all of these things. It should form part of an integrated approach that builds a productive and happy team. Along with the ESOP key employees need to understand what makes the business successful and want to participate in that journey. This will often involve a training and perhaps mentoring program that sits alongside the ESOP.

Apart from having a great team of employees working productively together to make us look good, as business owners, why would we want to go to the trouble of introducing these programs into our business? Well, there are a few primary reasons that will be central to the interests of most of us. We will enjoy going to work more ourselves. We will make more money and our businesses will be worth more when it comes time to sell or transition.

So, if you think that going to the trouble of trying to improve the lives and job satisfaction of your employees will only cost you money, perhaps you need to rethink. Owning and operating a business of any size is never easy and is constantly full of challenges. Meeting those challenges head on, is much easier done if it can be managed with a team approach.

One of the key factors that impact heavily upon a business’s value is having that business too heavily reliant on the owner or owners.

To help improve the value of your business, think about an ESOP as part of your strategy. 

Get in touch with one of our accredited business advisers to discuss introducing an ESOP to your business strategy.

Darryl Bates-Brownsword

Darryl Bates-Brownsword

CEO | Succession Plus UK

Darryl is a dynamic, driven Business Mentor and Coach with over 20 years of experience and passion for creating successful outcomes for founder-led businesses. He is a great connector, team builder, problem solver, and inspirer – showing the way through complexity to simplicity.

He has built 2 international multi-million turnover businesses; one now operating in 16 countries. His quick and analytical approach cuts through to the core issues quickly and identifying the context. He challenges the status quo and gets consistent, repeatable and reliable business results.

Originating in Australia, Darryl’s first career was as an Engineer in the Power Industry. Building businesses bought him to the UK in 2003 where he quickly developed a reputation for combining systems thinking with great creativity to get results in challenging situations.

A keen competitive cyclist, he also has a B Eng (Mech) Engineering and an MBA.

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