When I sold a majority of my business (financial planning firm Ovation Finance Ltd) to an Employee Ownership Trust (EOT) in 2018, there were around to 220 EOTs in existence in the UK.
After deciding that the EOT was the exit I had been looking for, I researched and wrote a book about EOTs, The Eternal Business. Since then I have been promoting the concept through conference talks, webinars, articles – any way I possibly can, in fact!
The latest statistics from the Employee Ownership Association (EOA) make for quite startling reading. In 2018, the EOT was considered by many advisors to be niche and only for certain types of business.
In fact, it is has grown massively in popularity as people have understood the attraction of selling for a fair value and seeing your business continue.
The Ideal Exit
The trend towards employee ownership as the ideal exit is gathering pace. Remember that 220 figure in 2018 – well, there were 139 new EOT sales in 2020, and in the first quarter of 2021 alone there were 72.
So where are we now? As of the end of 2021, there are 576 EOT owned businesses in the UK. And there are many, many more businesses who are working on their transition.
The Eternal Business Consultancy is currently working with many companies, who are going through our transition programme. Last week alone I was contacted by five business owners interested in the EOT as the ideal end to the entrepreneurial story.
We have over 100 business owners in our pipeline who are considering starting the transition to EOT. Some of them have been in that pipeline for four years now! They are still happy to receive our weekly newsletter, and are still interested in the EOT, they are just not ready quite yet.
Successful succession planning takes time.
1 In 20
EOTs have become so popular that they now count for one in every 20 private company sales in the UK. This is hugely positive and demonstrates how far we have come in a relatively short space of time.
The EOT will unquestionably be appropriate for far more than one in twenty business owners. So why is this figure not much higher?
One answer is that EOT owned businesses do not operate like privately owned businesses. It takes time – maybe years – to transition a business from one with a small number of owner managers, to one that is ready to benefit from the EOT.
Given that the owner gets paid to the future profit of the business, taking time to make this transition is essential. It’s what The Eternal Business Consultancy was established to do.
However, there is a second reason.
Getting EOT Advice
The people who advise business owners on their sales do not always like the EOT. As there is no purchaser to negotiate with, business brokers and corporate finances advisers don’t really have much of a role to play.
As a result, some of them forget to mention the EOT as an option for owners. I have even heard some owners inaccurately actively advised that the EOT is not right for their firm.
So do make sure you get specialist EOT advice if you think this might be an exit for you. This is why we at The Eternal Business Consultancy spend so much time promoting the true benefits of the EOT as the ideal exit, and speaking to owners.
If you’d like to know more, or want to have a chat to see if the EOT might be right for your business, do get in touch.