ESOP Builders Inc. September 2016 Newsletter
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How Does a Management Buyout Relate to an ESOP?
  by Perry Phillips, President of ESOP Builders Inc.

A “management buyout” is a buzz phrase currently used in many business discussions, and for good reason.

The greatest generation of entrepreneurs in Canadian history will retire within the next 10 to 15 years, and these men and women are looking for a way to exit their companies in a way that meets their needs.  Not only do they want to leave with an abundance of retirement funds, they also want to leave a legacy.  They want to ensure the business they built and nurtured will thrive and continue to support the employees and enhance the community.

You would think it should be easy to achieve these needs by selling the company to a third party.  Not so.  Studies show that only 1 out of 4 privately held companies will be successfully sold.  And of those that sell, many are restructured, or due to a change of ownership, the culture is drastically, and often negatively altered.  What about the original owner?  Studies indicate that, of the owners who sell their companies, over 75% of them regret their decision and are unhappy within 12 months of the sale...

Telling Stories:  The Receptionist
  From the NCEO Newsletter

Ron Gilbert of ESOP Services tells this story:

I received a call from the CEO of a mid-size U.S. Government contractor in the Washington, DC area. He explained that he had been referred by his accountant and he would like to meet to discuss a possible ESOP for his company. He brought his chief financial officer and began by explaining, "I explored a possible ESOP transaction about five years ago, but we never did anything. I had completely forgotten about the ESOP until a few months ago when he hired a new receptionist. She claims that she just left a company called SFA, Inc., with an ESOP account worth over $500,000. Do you think that is really true?"

"Yes" I explained, "I was actually on the board of directors of SFA, Inc., which was a 100% ESOP-owned S corporation until about a year ago, when it was acquired by Global. The ESOP was in place for 20 years, and the receptionist worked there the entire time. SFA actually had 14 employees who had ESOP accounts of over $1,000,000."

"I worked at SFA," stated the CFO, who was seated next to the owner. "I left 20 years ago."

If you are working for a successful ESOP company, stick around.

ESOPs Offer a Retirement Savings Solution

  by Camille Jensen, Vice-President of ESOP Builders Inc.

If Canada is facing a retirement savings crisis, then expansion of Canada Pension Plan (CPP) is only a small part of the solution. How else can we encourage Canadians to save for retirement?

A model that’s proven to be extremely effective in helping more people build wealth while keeping businesses competitive is employee share ownership plans (ESOPs).

ESOPs are formal plans that allow employees to participate in the long-term value growth of the business through the purchase of an ownership interest.

The model works extremely well because you’re not only encouraging people to make investments, but most importantly, to make an investment in a place where they actually can affect the outcome.

There are many individual stories in Canada and internationally of people building tremendous wealth as a result of being part of their company’s ESOP...

New Survey Shows Strong Preference for Employee-Owned Products and Services
  From the NCEO Newsletter 

A new Google Consumer Survey done by Ownership Alliance found that the American public sees employee ownership very positively.

Ownership Alliance conducted a nationally-representative survey to test their employee-owned certification mark. The most striking finding was that respondents were willing to pay significantly more for products from companies that were certified as employee-owned.

When asked about what that said about a company using employee ownership, 41% of respondents said that being certified as employee-owned indicates a company provides fair compensation to employees, 29% said it strengthens the local economy, 20% said it places a high priority on customer support, 19% said it cares about social responsibility, and 16% said it provides high quality products and services.

Translating surveys into behavior is always uncertain, but these results show that there is a very strong positive view of employee ownership among consumers. How this would translate in business-to-business buying is less clear, but will be the subject of future research by Ownership Alliance.

Marking a Century of Employee Ownership
  From the NCEO Newsletter

This year, the American Truck Historical Society awarded its first-ever 100-year award to Rieth-Riley Construction Company, which Albert Rieth founded in 1916. Although no one from the family currently works at the company, its name and legacy are being preserved and built on by its employee-owners. According to an article in the Chicago Tribune, the company now has almost 400 employee-owners. One of them, contract administrator Jennifer Brozak, said that Rieth family members attended the company's century anniversary celebration. She said the family members "are so proud of their legacy."

All the Canadian ESOP Guidance You Need in One New Book

ESOPs in Canada: How to Implement an Employee Share Ownership Plan to Grow and Exit Your Business with Your Legacy Intact is a comprehensive and practical guide to every aspect of designing and implementing an Employee Share Ownership Plan in Canada.

“This is a must read for those business owners thinking about exploring the notion of employee ownership and discovering that “skin in the game” for those on the front lines of leadership is a secret weapon to surpassing your wildest dreams and forecasts! It is magic”

~ Doug Flynn, CEO, Flynn Group of Companies

More information and order details at

Notable Quotables
"Chase the vision, not the money, the money will end up following you
." -- James Bryant Conant (1893-1978), American chemist

Upcoming ESOP Events
See ESOP Builders events page for details on upcoming ESOP events. 

Canadian ESOP and Ownership Thinking Books

ESOPs in Canada: How to Implement an Employee Share Ownership Plan to Grow and Exit Your Business with Your Legacy Intact (2015) by Perry Phillips and Camille Jensen.  Buy this book on Amazon or FriesenPress.

The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners: A Guide for Professional Advisors - Canadian Edition (2007) by Perry Phillips and Richard E. Jackim.  Buy this book on Amazon.  
Dr. Carol Beatty's book, Employee Ownership: The New Source of Competitive Advantage (published by Wiley and Sons 2001 - ISBN 0-471-64641-5).  Buy this book on Amazon.
Brad Hams' book, Ownership Thinking: How to End Entitlement and Create a Culture of Accountability, Purpose, and Profit (published by McGraw-Hill 2011- ISBN-10: 0071772456 - ISBN-13: 978-0071772457).  Buy this book on Amazon.

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