Considering Employee Ownership: Questions to Ask Before Undertaking the Initiative
For many, the idea of owning a business is part of the American dream and there are thousands of examples of that in the country’s small breweries. There are times when founders and owners want to add new people to the mix and considering bringing on existing employees as owners can have a lot of benefits.
Separate from establishing an Employee Stock Ownership Plan (ESOP) where multiple employees have a stake in the company, finding a single employee who wants to take on an ownership role that can benefit the overall company can be a smart move, says Erik C. Coleman, a beer industry consultant and the director of the Trocaire College Brewing Distillation and Fermentation Program.
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“It should be someone that you’ve had working with you for at least a little while,” he says. “There might be someone who comes in off the street who is eager to buy into the company but if you, an existing owner, is sticking around you should first make sure you know that you can work well with them.”
There are several ways that an employee can gain ownership, either by buying in or by gifting. As an existing owner, figuring out the right option for you and your business is important before taking the necessary steps.
Having existing employees who are more than just treating your company as a job, but who have a passion for the business, understand its workings and want to be part of the process to help it grow and succeed should be high on a list of requirements.
“Whoever an existing owner is considering make sure they have experience in and above brewing,” says Coleman. “Depending on your business, they should understand front of house, or the kitchen, and the business end of things, or a desire to learn and have demonstrated in the past that they are willing to put in the work.”
A good owner will have an understand of employee habits and strengths and should be able to see who could be a good fit for an ownership role.
Unless a current owner is fully looking to step away from the business, Coleman suggests having a sliding scale of ownership.
“Have them come in at a certain small percent at first and then be able to purchase or acquire credits over the years,” says Coleman.
A contract that clearly states duties, expectations, and contingencies is paramount. Personal dynamics will change once ownership is granted and having a clear understanding by all sides on what is expected will mitigate unnecessary or difficult conversations down the road.
“The bottom line is that unless there is an immediate need, don’t rush the process, make sure you know who you will be working with, and scale the ownership stake over time,” Coleman says. “Money can change a relationship.”