I was sitting down with a business owner when they asked me; "give me 5 reasons why I should start an ESOP in my business?"
I didn't expect to start the conversation this way but it was a really good question. It's a question I'd obviously thought a lot about over the years. My answer must have hit the spot, because we ended up putting together an ESOP.
The following Top 5 are in no particular order, yet on balance I would probably always think about these first;
- Giving - when you want to reward people for the effort and the value they have created by being part of the business.
- Getting A players on the team - a well designed ESOP leads to better outcomes with people. It tends to attract people who are willing to put that little bit extra into things.
- Business growth - with an A grade team comes increased business growth.
- Time - this is a whole topic in itself. It's akin to the sum being greater than the parts. You get more time, the business has more time. There is time as a concept of having time to consider things like control, giving out information and some of the sort of objections people have to entering into an ESOP.
- The pie gets bigger - our modelling across multiple businesses indicates that the business gets bigger. It sounds obvious but one of the frequent questions we get is "why would I give equity away?". The truth is, its more about the employee earns it and contributes to a bigger pie of which you are also sharing in. At CORPLAN we are specialists in SME's and the businesses we see generally have capped out their growth for various reasons and an ESOP injects new life into the business.
Look through our insights because we will have articles in more detail on these benefits of ESOP's. If you are unable to find the topic you are looking for, send us an email at info@corplan.au and we'll be happy to prepare an article covering your specific question.