Over the last couple of years, I have spoken with many, many business owners interested in the sale of their business to an Employee Ownership Trust (EOT).
One of the common themes that is that they tend to think that the journey to the EOT will be easier than it is actually likely to be. And yes, I am including myself in this!
When I speak with owners, I tell them the importance of issues around employee engagement, new leadership style, empowerment, the employee voice, and many other areas that are so important to making an EOT owned business successful.
I stress to them that it might take a couple of years before the business is ready for the final sale to the EOT.
I would estimate that some 7 out of 10 owners respond with a comment along the lines of: “Of course, it won’t take us very long to get the business ready for the sale to the EOT, we are already working in line with these principles.”
I also get a lot of comments from owners who have spent a few months preparing the business and believe that they are ready.
To shine a light on the reality of the transition to the EOT, I asked former owners to look back on their transition to employee ownership and asked what they would have done differently.
- Once you have spent the initial time making the decision on whether the EOT is right for you, get a transition team together at an early stage. David Sproxton, one of the two founders of Aardman Animation, says “I would have pulled a small team together earlier to get to grips with the process (Aardman took 4 years preparing the business).
- Don’t go straight to lawyers, but spend the time preparing with employee ownership experts. Alastair Sawday of Sawdays commented: “With hindsight, I would have been clearer about the exact arrangement to make over the sale and transition, rather than waste time and money with lawyers tweaking the structure. This would have involved more time with (less expensive) advisers.”
- Having a clear path to follow would then have helped Aardman. David says “The big thing that would have helped us all would have been to have been able to see a list of actions much earlier so that we knew what we were in for!”
- Rupert Newman of Westfield Oak would have started the process earlier. He says “not every circumstance could be foreseen, so mistakes were bound to happen.” This would have given “everyone time to get used to the idea before it happened. Also, it might have been better to get the new directors in place much earlier.”
- Tim Broomfield of PB Design says “Moderate your personal joy in the sale & transfer of the business to EO. It affects the tone of your communication and can lead to misunderstanding many years later”. Another founder agreed, suggesting “I’d be more careful around my use of language. Employees don’t always greet the news with the same enthusiasm as you show, and this can lead to trust problems later on.”
- Get a strong board to help you through the transition and beyond. Alastair Sawday again: “I am grateful to have had a supportive and ethically unshakeable Chair to maintain my resolve. Since the sale the employees have been lucky in having a sympathetic MD to support them.”
- Tony Shally of Espace Europe wishes he had “Made sure our accountants understood the complex nature of the trust, trust company, our holding company and trading company. We have spent 2 years trying to sort out various issues with payments from the trading company up to the trust to pay us for shares.”
- Be clear on your Flag (the purpose of the business) early in the process. David Sproxton of Aardman again: “We’d written our Mission and Vision statements a while ago but didn’t actually couple them with our values. Doing that would have helped focus the approach to employee ownership a little earlier.”
These are things that former owners would have done differently so that you can benefit from their hindsight. But these are things that would have made the transition smoother. Let’s give the final word to Rupert Newman:
“But hey, we went EO 10 months ago and I am living in Sweden teaching. I still have regular contact but most of the time the company are getting along just fine without me.”