Employee Share Options – Giving Away My Business?
What are Employee Share Options all about? Is it giving my business away – or is there more to it? And why would I “give” it away?
When it’s good:
You’ve built your business up over the years and you know that your employees are one of it’s the biggest assets. If your team are all focused on the same goals and follow the same vision, then your business is a delight to work in. You’ve nailed the culture and attracting new talent is easier. Retaining the existing employees is easier too. Over all it’s a nicer place to work than the dysfunctional petty politics of many a big corporate environment. You may know this from experience yourself – it was one of the drivers for you starting your own business. Taking the bravery pill and jumping into entrepreneurship is a lot easier if you don’t love your job in the first place.
When it’s bad:
Your employees can also be the biggest cause of stress and worry. Do you face the endless problem of attracting and retaining the good people? All around you there are bigger companies willing to pay more money and provide lots of training and benefits. You know that money in itself is not the answer. So, what is? How can you get your team to show up with the same passion and pride that you have for your business? What’s the difference between a highly engaged team of people who love your business and a completely disengaged team that show up and do the minimum?
When I’m not there:
One place to start is to ask: What happens in my business when I’m not there? Or maybe an easier question is: Am I always there? Does my business rely on my too much? If you are always in your business, reacting to the latest fire or problem, then how can anyone else take the reins?
When your team know what to do and when to do it, your business flows. Many businesses have no formal processes and rely on one person passing down their own unique way of doing things to the next person who comes along. Worst still is where a role has no handover and your staff pick things up from their last place of work. It’s often not a transfer of good practices.
The more your business relies on you being in attendance the less your business is worth. Future buyers will pay for businesses that are not dependant on key personalities who hold everything in their heads. That’s a big risk for them – and the price is adjusted accordingly. But this line of thinking doesn’t solve the problem of a disengaged team – though it might explain it.
Thinking About Your Future:
If you are thinking about your exit plan, then you are one of less than 50% of all business owners who give it more thought than it usually gets. Many business owners fall into the trap of thinking that an exit plan is something you do about 12-18 months before you want to retire. The actual sale process for a company that is ready to be sold takes at least 12 months. The planning and preparation typically takes 2-5 years.
One invaluable fact about owning a business is that 100% of business owners do leave their business – one way or the other. Whether it’s by some kind of sale, or because of unplanned circumstances (death, disease, disability and divorce being the big 4). Too often businesses can’t find buyers and just close their doors. Over 80% of businesses that “go to market” to be sold are never sold.
The sale process is challenging and distracting – it takes you away from your business. It can have a devastating impact, especially in the process fails to complete. The more your business depends on you, the harder the sale process will be. Additionally, when you are selling to a 3rd party the process is adversarial. There are lawyers, brokers and accountants involved – it gets to be challenging very quickly.
But could your ideal buyer be right in front of you!
It’s possible that your ideal buyer is your existing employees. There are many different ways of getting your employees involved in the ownership with varying degrees of commitment. One thing that is universal in employee ownership schemes is the change in behaviour of your team – and the requirement for you to change your behaviour too.
If you are thinking of your exit options and wishing to move out of a day to day role in your business, employee ownership offers one way to make that happen.
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