This Design Firm Found the Perfect Transition Strategy by Converting to a Worker Cooperative

This Design Firm Found the Perfect Transition Strategy by Converting to a Worker Cooperative
RMEOC
March 16, 2021

Employee owners of Colorado worker cooperative Gallun Snow

“Who has time to run a company and figure out how to transition it at the same time?”

When it comes time to retire, a lot of small business owners struggle to find an exit strategy that benefits them and their employees.

Should you close the doors? Sell to another company? Promote from within and train another employee until they can lead the business without you?

In this story, we’ll cover why Gallun Snow — an award-winning, woman-owned interior design firm in Colorado that’s worked with clients like UCHealth, SCL Health and the Denver International Airport — decided to become a worker cooperative and enable nearly 100% of their team to become owners in the business.

At RMEOC, we’re building a more just and sustainable economy by helping small businesses in Colorado convert to employee ownership. Want to learn more about how employee ownership can benefit your business? Schedule a free consultation today.

Finding An Exit Strategy

When Founding Principals Lisa Gallun and Margie Snow started discussing retirement after three decades of growing a successful design firm, they spent a lot of time researching an exit strategy that felt like it made sense. They didn’t want to close the doors on a thriving team, and they wanted to consider all the options that would allow them to preserve their culture and legacy.

“30 years of blood, sweat, and tears is worth a lot,” said Sara Parsons, current Principal, worker-owner and early employee who was part of the transition process.

That’s when Margie and Lisa connected with RMEOC to learn about the different forms of employee ownership. The more they learned, the better it sounded.

“No one wants to build something with their blood, sweat, tears, and passion and see it swallowed up by a bigger fish,” Sara said. “Margie and Lisa didn’t want to let go of the culture that they built.”

Employee ownership stood out as a way to empower the people who had all been instrumental in growing the firm. Not only did it mean that they wouldn’t have to sell to outside buyers, but it also made leadership a team effort — something that made sense given the collaborative nature of a design firm.

And with employee ownership, each worker could benefit from having a financial stake in the company while participating in the management process. (Sara mentioned that even graduates who have only been out of college for a year are gaining the experience of being an owner that is typically only afforded to a handful of shareholders in a traditionally-owned firm.)

Transitioning to Employee Ownership

With the decision made to transition to employee ownership, Gallun Snow officially began working with RMEOC to explore their options and move forward with the process.

First, that included a lot of education about what employee ownership meant for Margie and Lisa as well as for the soon-to-be worker-owners. It also meant choosing between employee ownership models, like an ESOP or a worker cooperative. Ultimately, Gallun Snow’s company size and individual goals made them a perfect fit for the co-op model.

Then, we moved into the implementation stage. A hallmark of RMEOC is that we bring together a variety of experts, from partnering with attorneys and accountants to deploying our own technical assistance staff, to guide each step of the process. That made putting together bylaws and legally re-structuring the company as a cooperative much easier than trying to do it alone.

(In this case, attorneys from Jason Wiener, pc and CPA Bruce Mayer worked with Gallun Snow to support the legal and financial restructuring of the business.)

Finally, Margie and Lisa closed a sale to their employees and Gallun Snow officially became a worker cooperative on October 1, 2019. They were able to plan retirement with the fruits of their labor while allowing the firm they built — and the women who made it possible — to continue to thrive.

Making Ownership Accessible

Out of the 19 team members Gallun Snow has today, 18 are worker-owners. Sara credits this to an accessible buy-in model that makes it attainable for anyone who wants to be an owner to become one.

“The buy-in can be a big number for people,” she said, “So we do things like offer a 1% buy-in, break it up over three years, offer it as a deduction from paychecks — anything to make ownership accessible for as many people as possible.”

One of the biggest changes Sara has seen since becoming a worker cooperative is that, as owners, every member of the team feels more empowered to understand what’s happening financially. It deepens everyone’s knowledge of how the business is doing, and that helps people get on board with big decisions.

“During COVID, nobody knows the whole picture,” she said, “but at least we can talk about what we do know.”

The co-op is able to have conversations not just about how to keep everyone’s paychecks, but even more importantly, how to make sure that they stay viable as a team and get through tough times together so that they can continue to grow collectively.

Who Can Benefit From Employee Ownership?

For now, the team at Gallun Snow is still learning how to communicate the benefits of employee ownership to everyone in their community, and they’re hoping to become involved in helping other companies that are considering it.

Sara says that any professional services business that works in a team setting could benefit from becoming employee owned.

“You can’t be successful for your clients without your team members,” she said, “Empowering your team and getting their skin in the game going forward — I think that can only be a plus.”

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