ESOPs: An Exit Strategy for Canadian Business Owners

ESOPs: An Exit Strategy for Canadian Business Owners

When a business owner has built a successful business they are proud of, one of the most difficult decisions they will have to make is how to exit the company.

Employee Share Ownership Plans (ESOPs) offer an effective solution that allows an owner to realize their earned value while leaving their company they’ve built ready to grow in the hands of their employees.

ESOPs also offer business owners a flexible exit strategy. As long as a business owner keeps a majority of the company, they retain all of the traditional exit strategies and add one more option, selling to the employees. 

At ESOP Builders, we’ve found 10 key factors to implementing a successful ESOP:
1) Vendor must fully support the ESOP and be willing to disclose to employees.
2) Key group must have the business capacity and be willing to support the ESOP.
3) Key group must have an acknowledged leader that is well-known, respected and trusted.
4) Participating employees must invest – they have skin in the game.
5) Employees are engaged in decision-making.
6) The team and owner have the ability to manage employee expectations.
7) Company should have a history of success (earnings and cash flow).
8) An independent valuation must be completed to ensure transparency and fairness.
9) Provide communication, information, training and participation for employees
10) Adequate time must be allocated to properly design and implement an ESOP, so it is “owned” by those involved.

ESOP Results
More than 40 years of independent research shows that ESOPs will attract and retain people and increase employee engagement, leading to higher productivity and profits. Adding to this, studies have shown that ESOPs have a higher success rate for a business transition than selling to family or another company.

About ESOP Builders
ESOP Builders Inc. is recognized as Canada’s premiere firm for designing, implementing and communicating ESOPs to privately-held companies.  Visit www.ESOPBuilders.com and fill out our Free Feasibility Survey, or call us at 1-877-995-3767. 

 Our new book, ESOPs in Canada: How to Grow and Exit your Business with your Legacy Intact, is available on Amazon.