Co-op Conversion
Are you interested in employee ownership conversion?
Here are a few things to consider when you are interested in the idea of converting your company into an employee-owned business.
Company Readiness
- Why do you want to convert your company to an employee-owned business?
- Do you want to retire right away?
- Do you want to continue to be a part of the new employee owned business? If so, for how long?
Financial Readiness
- How many employees will become initial owners?
- Do you have any outstanding financial debts?
- Might you offer a full or partial loan and/or equity buy-in support to employees who want to buy the company?
- What income and/or benefits would you like to secure when you sell your company?
Company Culture
- Who will step up to fill your place as a leader once you depart?
- What is the general cultural environment at your company?
Governance Structure
- What is an ideal governance structure and a legal model of EO for your company?
The Employee Ownership Impact
Growing A Legacy
80% of business owners who try to sell don’t find a owner
Selling a business can be challenging. A sale to employees provides a built-in buyer, keeps the business going, and helps preserve its jobs and culture.
Building a Better Business
EO VS Traditional Businesses
- 5% Higher growth in employment and sales
- ESOPs are 25% more likely to stay in business
- 90% of worker cooperatives are still in business after 5 years vs. 20% of traditional businesses
Improving Employee Life
Employee Owners
- 4X Less likely to be laid off during economic downturn
- 2.5X Greater household wealth vs. employees in traditional firms
- EO improves job quality, builds wealth for employees, and keeps businesses rooted in local communities
The Conversion Process
The conversion process can vary depending on the structure and vision of the company. Here is the standard process of employee ownership conversion that RMEOC supports:
01. Exploration
- Initial consultation, including follow-up resources sent to owner/employees
- Owner interview & assessment to gather information
- One workshop with key concepts of EO & gauge interest
- Evaluation of fit with EO and determination about whether to advance to the feasibility phase
02. Feasibility Study
- The preliminary financial feasiblity analysis
- A full feasibility study, providing industry analysis, market analysis, organizational & technical analysis, and financial analysis
- Time period: 1-3 months
03. Coop Education
- The trend of employee ownership in the U.S.
- Legal Models & Governance
- Finance I
- Finance II (open book management)
- How to raise capital?
- How to build democratic workplace culture?
- How to resolve conflicts?
- Overview of the bylaws or operating agreement
- Time period: 1-3 months
04. Structuring
- Work in partnership with an EO knowledgeable attorney and CPA to finalize the new EO structure
- Implementation of the new EO structure
- New owners take the helm and begin operations
05. Completion & Thrive
MISSION ACCOMPLISHED
Ready to convert your company?
Converting to employee ownership offers both tangible and intangible benefits to everyone from the workers and selling owners to the company itself. Worker ownership is better for the environment, better for local communities, and a model for progress toward addressing social issues like racial and gender disparity in the workplace. RMEOC is devoted to advancing an economic agenda that works for everyone.
Interested in learning more about how employee ownership can benefit your business while creating a more inclusive economy?
Is your business located in rural Colorado?
Check out our Technical Assistance Funding for Rural Businesses!
