ESOP Basics

Factors that Affect ESOP Valuation

Business valuations are calculated a number of ways, as outlined in our business valuation blog post here. What’s important to note, though, is that typically an owner who is selling his or her business will want to maximize value.  Our goal with this post is to break down the factors that make the largest impact to company valuation.Recurring revenue / subscription revenue.  Recurring revenue gives confidence to the longevity of the business.   If there is any way to have recurring / subscription oriented revenue, this will command a higher valuationSEE DETAILS

What is an ESOP?

Simply stated, an ESOP, or employee stock ownership plan, is a qualified defined-contribution benefit plan comprised of company stock, held by shareholders at a company (which is usually all vested employees).  For the purposes of this website, however, an ESOP is a way to sell your company to your employees, enabling all employees to become shareholders in the company, and selling shareholders to obtain liquidity.ESOPs are a great way to align the financial incentives and rewards of employees with those of ownership, as all employees will hold shares in theSEE DETAILS

The ESOP Exit

An ESOP exit, in the simplest sense, is a sale of a company to that company’s employees.   The mechanics of how this all works, as well as how it all operates after the fact, are outlined below, and for the sake of simplicity an ESOP exit is a true sale of one business to another, with the typical outcomes expected (liquidity, new ownership, etc).Now, a more detailed explanation of this is as follows:  A sale of the company to its employees is a classic business acquisition transaction where there areSEE DETAILS

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Our mission is to maximize the benefits of capitalism and business ownership based on a fundamental belief that employees are the most valuable asset of a company, and that company financial performance accelerates when wealth is shared with employees.