Selling Your Business on Your Terms
ESOP – An Alternative Exit Strategy
By Frank Caputo
When faced with the decision to keep or sell your business, the unknown world of attracting a qualified buyer, negotiating price and terms and seeing a sales process to conclusion can be a daunting experience.
One way to simplify your life, take care of the people that have helped you achieve success as a business owner and create a great outcome for you and your family is to create your own buyer. You can do this through the formation of an Employer Stock Purchase Plan or ESOP!
ESOP’s allow the flexibility to sell a partial share of your business and remain a majority owner in control of all decision making or a complete sale of 100 percent of ownership. The ESOP strategy has significant tax incentives that can create a swifter payoff of debt and help fund strategic growth and expansion for the company. When combined with other planning strategies, ESOP’s are a flexible tool for the generational transfer of the family business as well, especially in situations where the next gen family employees do not have the financial means to buyout the current family ownership shares in the organization.
Another tremendous advantage of forming an ESOP as an exit strategy is the lift provided in performance of the employees within the organization. Workers now can learn about what it means to really be an owner in a business and how successful owners function in their daily roles in the company. This culture is proven to promote dedication and commitment for retention of staff while providing a reason for being the best one can be each and every day. Furthermore, employees can see the economic benefit of the plan and the impact it will have on their future retirement. The growth possibilities are endless when all employees in the entire organization are aligned to the long-term success of the business.
When exploring options for the ownership succession of your business, an ESOP often presents a viable solution and should be one of the options evaluated for creating the liquidity for your most valued asset, your business!
WealthPoint is hosting an educational event on ESOPs where we will be interviewing two business-owners who monetized all or a portion of their ownership by selling to an ESOP. We encourage you to attend the May 19th event in-person or via zoom – Register for the event HERE.