Check out this latest blog from Ian Harragan, Director and Co-Founder of i-confidential, on the value of employee ownership in securing the future of your business.
There comes a point in every business owner’s career when they face the inevitable question: Who will take charge when I exit? Do I sell the business I have worked so tirelessly to build? Do I shut up shop and move on? Do I pass it down to a family member?
These are just some of the questions founders will ponder when considering their succession plans.
It’s a difficult process, but most honourable founders will want a solution that fits all parties. Never putting jobs on the line, never upsetting the stability customers depend on, and never threatening the culture of the workplace they have nurtured and come to cherish.
It is these reasons why employee ownership is increasingly becoming a favourable option for many forward-looking founders.
Employee ownership is a relatively new scheme that benefits both founders and employees. It provides founders with an option to sell a majority share of their business to their employees, ultimately putting them in charge of the future. Through the vehicle of a Trust all employees become shareholders in the company.
The amount of shares the trust owns can vary. Often the founders will still hold a sizable share of the business, meaning they can exit at a leisurely pace. There is no immediate handing over of the reins, or garden leave. Instead, everything is passed along at a speed suiting all parties.
The move also offers significant financial gains. When employees pay the employee ownership loan back to the founder(s), it’s tax free, while employees are entitled to attractive tax-free annual bonuses. A few years ago, myself and the two other founders of Edinburgh cyber security firm, i-confidential, were starting to consider our succession plans. Business was booming, our sales pipeline was long and interesting, and our team was stronger than ever, but we each knew that in the not-too-distant future we would want to ease back from our position at the helm.
Struggling to work through alternative options to a trade sale, we were put in contact with an advisor from Scottish Enterprise who outlined the benefits of the employee ownership model.
My fellow co-founders and I only had three requirements. We didn’t want to be somebody else’s employees, but we did want to step back progressively. We also wanted to give the team an opportunity to continue the great work they were doing. Finally, we didn’t want to cause any disruption for clients. We wanted any changes to be seamless.
Five years on, and we can safely say we made the right decision.
The company is more motivated than ever. As founders, we still enjoy holding roles in the business, albeit we are now working fewer hours, and day-to-day operations are in the capable hands of our Chief Operating Officer and Senior Management team. Our clients continue to receive the exceptional service they have come to expect from i-confidential. Some might say it’s been a win, win, win.
For any business leaders pondering their succession plans, i-confidential would never hesitate in recommending employee ownership. The initiative provides employees and clients with a security blanket around their future.
Ultimately, the business possesses a team of committed individuals working in unison to be a success, continuing the legacy us founders are so eager to preserve.
Ian Harragan, director and co-founder of i-confidential