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How Employee Ownership is Reshaping Business

Updated: Apr 19, 2023

If you transferred to employee ownership, what would employees do differently?

When employees have ‘skin in the game’ they proactively participate in optimising profitability, increasing sales and managing costs. Ownership feels real because employees qualify for tax free bonuses and can participate in share schemes creating a powerful consensus. Employees are no longer spectators, they care about each other, they care about the customer and they care about performance and results.

How employee ownership is reshaping business

Environmental issues are important to employee owned firms.

The annual list of B Corp Environmental Honourees scored high for worker ownership. Employee owned Mott MacDonald and Stride Treglown are now certified carbon neutral and Riverford Organics have installed solar panels and set a target to convert over 70% of their delivery fleet to electric vehicles. The co-owned engineering company, Gripple has installed solar panels and invested £300,000 in a heat pump system reducing reliance on the National grid.

Other co-owned businesses have gone paperless, reduced external meetings and encouraged home working, reducing their carbon footprint while at the same time increasing profits, all from a grass roots level.

Employee owners aren’t afraid to make mistakes and as a result are more innovative. Gripple Ltd has established an innovation division, with the aim of helping entrepreneurs with funding and boosting employment prospects in their native South Yorkshire.

Delivery fleets are being converted to electric vehicles reducing costs

Employee ownership is now a primary option for business owners, often outperforming outside investment. Shareholders selling a controlling interest to their employees benefit from significant financial advantages, qualifying for full CGT relief and lower professional fees saving over 20% of their sale proceeds. Any excess cash forms part of the consideration and is distributed to the vendors, tax free, at completion.

When ownership is transferred to your employees, less consideration is paid upfront which, represents a great investment. You can charge interest on the outstanding sale proceeds and charge a warrant on a percentage of shares giving you a further 30 to 34% uplift on the original sale price. The internal rate of return can range from 7% to 15% depending on the debt structure and profitability of your business.

Employee ownership secures jobs and leaves your business intact providing a legacy for the founders. Vendors can choose their level of involvement with the business moving forward, either stepping away entirely or continuing to have input as a trustee, director or consultant.

If you would like to learn more, our free presentation 'Transition Options' offers an unbiased numbers based comparison between employee ownership and attracting outside investment.

Contact us directly for a free consultation on 01384 274 778 or 075 888 925 88

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