For many business owners succession planning is not a straight forward process. There might not be a family member willing or available to take on the company, and selling to a competitor or investors may not be appealing or appropriate.
Employee ownership is when a company is owned either fully by its employees or where the employees own a majority stake in the business. This method gives employees a stake in the decision making process and allows them to directly benefit from the success of the business.
Businesses which are sold to their employees enjoy an increase in productivity, as the staff now earn a slice the profits they all help to create, incentivising them to work more efficiently.
Employees can purchase the business either themselves through their own savings and income, or using external financing options such as a bank loan for example. This approach was taken by Riverford Organic Farmers in Buckfastleigh. There’s no catch – the business owner should expect to realise the full value of their business along with additional tax advantages.
The Employee Ownership Association offers free advice on how to start the process of an employee buyout.