Cash out without selling out

There are exceptions, but they’re rare enough that they prove the rule: If you sell your business to an equity-backed investment firm, chances are you’re going to be disappointed in what they do with it.

It’s no one’s fault. Your goal was always to build a business that was profitable and stable. Their goal—necessarily and rightfully—is to maximize the sale value of the business so they can implement an exit strategy.

The alternative is an Employee Stock Ownership Plan, or ESOP. You cash out by transferring equity to your employees, and unless you want to retire immediately, you’ll retain significant control over the business.

ESOPs don’t work for everyone. But when they do work, they will usually generate a productivity boost that makes your finely-tuned strategy even more effective. This 2017 study from the National Center for Employee Ownership puts some hard numbers on that claim.


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