EP31 - Alone Again, Naturally Needing To Consider Leadership For An ESOP

This episode highlights the leadership issue a business finds itself continually facing.  Ongoing leadership development is a common concern with most companies both before, during, and after the ESOP transition. Going through the feeling of being “Alone Again” is a natural and normal issue that needs to be addressed whether it be for management succession in the short run or for the company’s final exit plan. 

Transcript

[0:09] Hey everyone this is the journey to an ESOP and Beyond podcast all about esops and, and play stock ownership plans both before as you get closer and closer to maybe closing your ESOP or after the ESOP after you've closed Post ESOP how the how a lot of the intricacies of esops work. The podcast is in our fifth season thank you for joining today if you're brand new um you can check out our website at journey to an ESOP cam. This episode is going to start off with this.

[0:41] Music.

[1:31] Alone Again Naturally so this of course is um a song that's, kind of famous but back in the 70s so this is an old an oldie but a goodie and I. It's funny I've been listening to this song only because my son who's 22 found it and he was listening to it and kind of reminded me of the old days so alone again this is the title of the episode today alone again. As Gilbert O Sullivan describes this is this is a super powerful um message I think people understand or or at least consider and this episode is really going to be dedicated. As a a loan again to those CEOs out there or those founders of companies or those. Leaders that find themselves in a position where they just feel alone again. And the reason we're doing this episode is because I think some of the time the motivation for doing an ESOP.

[2:27] So this is more of the the pre- ESOP part of it is because they feel like, if I can do an ESOP it's going to it's going to kind of answer some of these issues related to being in a in a.

[2:41] Lack of of of of leadership depth, that it takes to either continue the growth of a company or bring the company to the next level or to manage through some of the deficits that the company has and yeah the real piece of this that as we start off in, and dig into this a little bit is thatif you've been in this position and what I'm going to describe is just kind of what it feels a little bit what it feels like. And I've been there so I'm not describing something I I don't have any basis of of understanding or knowledge when you are in charge of the company, and there are all kinds of a myriad of things that are hitting you as the person who's in charge.

[3:28] Things that have you know you go from 1 thing to customers. You know being unhappy with the business or whatever so you're getting you know maybe losing a big customer might might be a source of stress um it could be. You lose a a really great talent or person that you thought would be really helpful for the growth of the company it could be um the company's going through a financial, transition or difficulty where the company has um you know gone through either a lot of like growth running out of capital trying to kind of continue to grow or they've gone through a bit of a downturn um, you know that can be you know a source of stress so kind of like there's a lot of different things that can come and the person, that is in charge of everything sometimes can be seriously alone again right they can be in that place like there's nobody in this organization that knows what this is like right and, sometimes as you get you know you get into that you know and that type of position you can kind of Thrive a little bit in terms of you know you might get really, you know excited about solving these big problems and, over time you know in some cases you can kind of like say you know I've been doing this for a long long time and you kind of know you know as I as I say that.

[4:52] What that brings about and and I'm not saying you're at that place of burnout right there are could be people out here that are in a place of like I'm just done I'm burnt out and I'm done I waited too long to plan this transition or I'm just kind of like I I don't know you know if I can do this 1 more year type of thing, this is the emotional like this is the part of the emotional side of things that I would say are not on a spreadsheet are not in something that somebody's you know going to, immediately offer up as these are my goals and objectives you know in some cases I want to get out now as I say all that I think it's really important and I want to be super clear at the front end for for esopsand and a transition to an ESOP.

[5:37] It's by itself without anything else is not going to solve this problem, this is not a uh a problem where we have within the ESOP is you know there are things in the ESOP that can help solve the problem but it's not going to directly solve the problem because there are things within an ESOP.

[5:57] There are going to be tools that we can use that will get going to get into in terms of you know this alone again, is really about leadership development so as we get into that concept you know what how important that is whether you're going through an ESOP or not it's going to be such an important topic to be to be thinking about. And I'm timing this very specifically right around kind of this time part of the year the towards the end of the year. Um I think for some companies for many companies you go into a strategic planning mode, um and if you're not doing that you really should be doing that by the way just to get kind of what's going to happen in 2025 how are we going to get to where we're going and I think this is a good strategic planning topic. Because it is about Forward Thinking a little bit and terms of assessing Where You Are. And in some cases like there are cases where that is going to resonate immediately with people like yeah I'm definitely needing to develop my leadership and it's more of a um, uh DEFCON 5 issue like we got to do it now and then there's other ones that you know you're not there yet you can see that coming down the road because you can see either there's a there there's a draw of growth in the company that's going to be pushing this topic up the ladder in terms of all the agenda items and so or there's a potential for people to start thinking about.

[7:18] You know getting out and so you know how long does it take to bring somebody into what you're doing um and have some competency and proficiency related to to those functions so so what we're trying to get into is is. Avoiding hopefully you know the possibility that you're you're in that burnout and you got to get out and the reason I say all that is because the ESOP itself is is not a quick get out situation right it's not I can sell my stock to the ESOP and then I'm suddenly gone, the the truth of an employee stock ownership plan. Um transition is its primarily at the front end and ownership transition not a management transition.

[7:59] And we have to delineate those 2 things separately even though the overlap and then there's a lot of elements of, of work that's done to kind of facilitate both kind of in conjunction with 1 anotherum for a lot of experience like case studies I would say that there are, a a hole if I took the bell curve of of ESOP deals and I said okay there's a whole bunch of deals within the bell curve that I would say on average their management succession plan is not, 100% but it is in process, that's kind of the the average is is what I would say my experience is on the left of that bell curve is your outliers where there's literally no transition plan at alland we still do an ESOP because the owners like look I still like working, I still like doing what I'm doing, and they're not they're not necessarily negatively affected by the the responsibilities they have they just don't want the burden of the ownership any more and they also want to start to kind of bring about that transition of employee ownership into their culture and so that's the 1 side the other side of the outliers is a completely or out like a 100% out they've done it all the management all the owner all the ESOP stuff is just kind of going to be more of an ownership transition that's a much easier situation if their goals are to try to just kind of finalize everything so what I'm speaking to are people in that middle of the bell curve.

[9:29] And it's also not just for companies that are going to transition to an ESOP it's also for companies that are already esops and they might already be an ESOP. That's done a first aid transa transaction and maybe they're looking at their second stage but either way, um the the the main focus here is to identify this pain point and as I said I I remember. Um this is where you kind of get you just kind of get normal to or you normalize things in your.

[9:59] Your business role your business function whatever that is and if you're the CEO or you're the you're the key person like the 1 that's just sitting there thinking oh how are we going to do this how are we going to do that you might have some great people around you to kick ideas off of but you're ultimately the 1 that's got to move the dial right. And I remember just in that sense that season of life where I just felt like every. Every decision I had to make week you know day after day week after week month and quarter and year.

[10:29] It just felt like if I didn't make the call if I didn't kind of push forward on the thing nothing was going to happen. And then the things that were happening that were kind of like those stress factors that I wreck that I was discussing earlier. As they started to kind of like just invade my my world of like oh now I got to deal with that I got to deal with that I felt like there was this metaphorical damn that was just constantly breaking you know and I'm plugging 1 hole and then I'm plugging another hole. And that's really the reality of it and I think for me personally in business wise professionally I went through this this kind of.

[11:06] Baking process where I didn't realize it was just it was just cooking my goose and I and I got emotionally um overwhelmed with it all I mean it just happens you know and you because you just got to do what you got to do and. I remember like just being up literally all night long, just thinking and looking at the sealing fan that's just kind of turning and just thinking about well what about this what about that right and so you can only do this for so long and and I as I say all that I mean it's it's really a result. Of having being in that position and being kind of in that place where you're just. Um constantly the the singular part of that part of the company which is a critical role. And nobody can do it forever and it's never good to do it alone right but the reality is is that that's that is what happens and a lot of times and so, this is the first up this the first part of this is this to really address how the ESOP itself is a good tool, to work through this and again to continually challenge.

[12:16] The people that are listening to think about this as an opportunity if you're depending on where you are in this stage of life. Um where you do have some time and some roadmap to kind of like work through and start transitioning. Um so when we think about the Employee Stock ownership plan as a tool what we're really contemplating in this andis what it is and what it isn't, and what it is is is the opportunity to you know do a couple different things that I would I would always kind of start off like this with the early days of this podcast I'd be like an ESOP is for. You know an exit plan a succession plan and a growth strategy and you know I said all that because it was like that's all true and I I still I believe all that stuff is is you know what happensand as I as I contemplate even saying that.

[13:08] The first thing I would say as an exit plan it really needs to be qualified in the statement of saying an ESOP, transaction is an exit plan I what really is meant by that is that it's going to facilitate the exit over a period of time that's not immediate. So and it may be it's really more of a of a.

[13:30] A result of the company already having done enough management transition planningin order to affect the actual exit itself of the person that I'm talking about that needs to that's ready to go right and so in the event that that they're there as I said that's kind of more of an outlier than anything, then it works really well because now the person can kind of move into that place where they've really not worked their you know this is a person that's probably not coming in the office regularly this is a person that's probably um just checking in time to time they're probably doing a lot of traveling they're probably able to kind of enjoy life because they did the management succession planning you know effectively already and they've allowed all of that they kind of kind of steep in and I've had um clients where we get to the modeling and they start looking at it they're like man we're just not where we need to be. Leadership wise so and they naturally and rightly so take a pause, and say you know let me go back let me come back to this let me I'm just not ready for it because I don't I don't think it's a good time for us to do the ESOP transaction in the event of having such a deficit in my leadership group. Um and I and I want to talk about that a little bit kind of as we push I'm going to push that out for a second but I want to come back to that because I think it's a important idea of timing and we've talked about timing before of your ESOP.

[14:57] But the other side of this is that you know I I just want to look at like what an ESOP transaction does though for the transition plan, um and this is this is going to be true for a contributory plan, um where you just do like a contribution of stock it could be with redemption or without Redemption that just means I'm going to take some of my stock. And I'm going to go ahead and just get that ESOP plan set up and ready to go and take a deduction off of that and maybe I'm going to do 2 5% something like that of of my total stock. As shareholders or it could be a true for like a partial sale hey we're just going to go ahead and do our 30% or 40% or whatever and, you know we're going to start working towards the goal of doing this and um that gets the that gets it started right. And then or hey we're we're ready to go now we're going to do it 100% but either 1 of those you know of those 3 options if you just kind of took them as 3 options whether you. You know the way where whether you created a lot of other complexities to the transaction what we're going to be able to do at the ESOP as a tool for leadership development.

[16:05] Is we're going to be able to start looking at the culture shift of employee ownershipthat's I think, part of what is talked about so readily but how does that what you're going to have to do when you're when you're looking at this from a purely management succession planning standpoint is you're looking at, from the perspective of either the existing key group of people and more importantly that person who you feel like is going to replace you so I'm getting a very singular about this and not you know as pluralized with the whole key group even though it's kind of applicable to the the whole key group um, what's in it for that person and there's a combination of things that I think are important as you start thinking about.

[16:50] You know a small contributory plan a partial or a 100% plan either way of course that person whoever that that person is um as we start thinking about their world their life what they want what's important to them which is what you got to dois start thinking about like of course there's going to be some some. Eligibility for them to be part of obviously the ESOP because they're an employeethat's not enough right so it's not going to be enough in general to motivate them to step into that role so um I've seen this done where the person is definitely going to going to carve out a comp package a compensation package that's going to be um. Adequate and driven around the market of what it is that person should be paid um and get that get that comp on the on the table right and that agreement of what that looks like so with compensation for that and we're getting it into like the ESOP is a helpful tool because it starts to process of transitioning the, the stock out of the shareholders hands and at the same time as we use this in segue um a leadership.

[18:05] Um succession plan in place for again for the for the singular position and we're calling in all kinds of things CEO let's just stay with CEO. So I'm kind of just drafting that CEO Prospect into this now in this in this scenario what I'm really speaking about. Is a an existing person who's just being promoted so that's that's going to be 1 of the options that we're going to have.

[18:29] And it's obviously a lot easier to do that because you have knowledge of them they've been probably there for a good number of years, they show all the attributes of doing that.

[18:40] Um so we're going to have to nail down the compensation and of course part of that as we say what's in it for them is the ESOP shares they're going to get out of the plan secondly in just as important maybe more you know more important really, is that they're going to need to feel some level that's deeper than just the employee ownership um. Piece of retirement plan stock that they're going to get in their plan.

[19:04] And that's usually accomplished by a stock appreciation rights program and helping them understand the potential benefits and the upside of that plan is going to be really important. To be able to communicate. Um to get them to that next level and that timing wise can be done um a lot of different ways but timingfulfilling all that you usually happens. You know it starts at the beginning and the planning process but it's going to happen after the closing of the ESOP transaction. But your advisor should give you some idea of what the potential value of that could be to that key person because really they're smart enoughthey're going to want to know, and they're going to want to understand that you know purely just from a category of compensation what this means to them. Of course what this means to their familyum what we're asking them to do is go back into the seat that you've been sitting at and.

[20:04] Drive Rite Drive the company right towards the thing so it's a pretty big responsibility and it's and as you both as everybody knows like going into that like that's going to take. You know a significant amount of. Of their energy and what they're putting in and it may be maybe they're doing some things alreadyand they're really qualified and this is just a a an add-on but we want to make sure that we've we've checked the box with that.

[20:29] In some cases you know with the stock appreciation rights it might make sense to do a combination plan where you do some level of direct bonus based on the company hitting their targets, the Tsar is also a performance star so it's going to be based around targets as well so it's the targets are important because you the the additional compensation that the company is going to fund for this position should be reasonable. But also effective right it should be reasonable and that the company can afford to do this if there if it's built around targeted incentives, primarily this should be ibida which would be the net income Plus depreciation plus your interest expense plus your um your non your non-cash or non-recurring expenses those kind of things your overall adjusted EA targets that you're painting out into, into your forecast which basically ultimately becomes the centerpiece of the of the negotiated valuation for the ESOP. And also then becomes the model that of cash flow in the future that's going to repay the debt on the other obligations of the company has these are the targets, that we want the the new CEO to adhere to so that this makes a lot more sense for the company to be, um giving them a very solid base pay plus the incentive on, um maybe a bonus with IBA and also the accumulation of SAR shares that would be performance-based.

[21:58] Music.

[22:32] Alone Again Naturally so as we segue into this um I wanted to kind of. As we leave the idea of incentivizing key people it's obviously important financially to put something together that makes sense.

[22:45] I'd say transition into that idea of leadership development kind of and in tandem management succession.

[22:53] The thing is I most this is 1 of the most I think important elements to um identify early in the process. As we're thinking about doing an ESOPand so I'll kind of say this as we go through it I think thatthe thing the thing that I have experienced.

[23:10] Is ESOP itself is an excellent tool to facilitate this concept now I think where it gets a little bit nuanced. Are going to be the the the where the owner and the key owners are finding themselves in their Walk of Life and. What I mean by that is this concept of an Exit Plan and how important it is and not important but how maybe the timeline of what that Exit Plan is really looking like for them. So let's just say scenario wise if if that person is.

[23:46] So spent you know and and been doing the joband they're ready to go.

[23:53] And they're like I if they're trying to get out of there within a year time frame. And they're trying to do an ESOP like literally from right now to whenever that is it's really going to be hard and I would say most people would agree.

[24:05] You virtually impossible to just you do an ESOP get them out of there andpart of what has to be looked at as the adviser is you have to assess. The um the strength of the management team and the development of the management team into those specific key functional roles. That that CEO or that owner had maybe. Embodied maybe so well and and had not yet done anything about like pushing forward on that or they have done something and that's why I think this is such a a, a fun topic because there is no right answer here it is to motivate as I talk about this.

[24:45] Companies to be considering this whether you're doing an ESOP or not whether you already are an ESOP but but to understand that the leadership development. Alongside management succession is a critical business, um activity that has to continue on has to be started has to continue it has to be something that that is being worked on almost every single year I believe as we go so.

[25:10] 1 of the things as we think about that we have to kind of think about it from the goals and objectives of the owner as we start the process and so, I'd say as as we go of course there's going to be a lot of different goals and objectives across the board where their exit is and sometimes they don't know like the exit they could say hey, my exit might be in 10 years or my exit might be in 5 years or even maybe even longer than that in some cases. So we need to ask that first question like where do you feel like your exits going to be.

[25:38] The second question would be how do you feel like you're if you were not going to show up today for work or for the next month or for the next quarter how do you feel like your business would function where would it fall down in the sense of of the deficits and so. Um that's a really good question to ask because it's important then as we start to assess number 1 where they are number 2 we need to really make an assessment around um the key people that are there and ask the question um, what timeline does this look like. And so as we do that I think it's really helpful to um start to use that those assessments to create a a plan, and so as as as much as we plan everything you know like in our business we might have a strategic plan we might have a, you know a marketing plan we might have like an IT plan right we need to have a very specific written. Plan when it comes to not only leadership development again segue into the management succession side.

[26:42] Um and and really ask the hard questions and so as we as we do that I think it's going to be helpful to to provide some insight. Um and I think it's I think overall not only Insight but to either protect the existing valuation that we already are like that makes sense that value is good, or continue to maintain or even anticipate the growth of that valuation this 1 thing that we're talking about, I believe is is a key factor for for all of that and that's why it's always going to be asked about. Every single esap transaction the trustee and evaluation firm are going to talk about your leadership team they're going to talk about who they are how long they've been there, what is the succession plan they may not they may not push hard on like you know have a succession plan they may not do that at all but they will want to understand where you are with that.

[27:34] And. The the companies that have more value are the companies that are not highly dependent on a single point failure so that those are all important things to keep. In context in the in the backdrop of what we're talking about and kind of. I wanted to say that because I want you to understand like the importance of this is so is so Paramount to the the existing valuation the future valuation it also the continuation of of, the sustainability when you're thinking about an a a sustainable ESOP company um you have to have good Management in place and they have to have um, you know this this this process of continually building that out as we go. The the thing about an ESOP though I believe is really really important and I wouldn't just kind of focus in on this keywordbecause it's used a lot and I'm going to focus on it and then I want to talk a little bit why I believe it's so important and the key word is flexibility.

[28:31] And the reason I I like that so much is becausebecause an ESOP transaction, um although it may not be and it isn't in many cases a this perfect Exit Plan for somebody to get out in a short termit is something that allows for. Some time to be considered in the process of of electing. Towards to you know my my the skill set moving into the responsibility of somebody else and electing somebody to be able to move and phase out over a period of time. That providesa way to flex into things that the company owner may want to hold on to.

[29:14] Or may want to releasethe Maybe the owner is looking at it and say you know what I just don't want to do and then any more of these types of meetings I don't want to go to all the, the functions anymore or all I've been kind of don't I've been doing that my whole career I want to I would love to just focus on this 1 aspect right so flexibility itself. Means that we can create a a.

[29:36] A a plan that can do everything that we want to do which means we can create a plan that helps the the owner. Succeed in the in the work that they want to do and it may be they want to phase out of everything and just go fishing it may be they want to phase out of these things that are just not something they enjoy anymore they don't have as much passion about it. Um either way that's that's going to help us to understand like they can they can then do what I believe is a very good strategy for um affecting management succession. And that is co-managing around those functional responsibilities. So they then can be involved in transitioning those functional roles and responsibilities now as we talk about this 1 of the things I wanted to kind of say is that we have to. Think about as as existing CEOs. We've got to think about the transition in a paradigm that's maybe different than what we think about now which is what I mean by that is is that we sometimes think as people you have to find somebody exactly like you. To to transition what you're doing because you want them to do it exactly the same way.

[30:50] And that isn't the real world and that's not even. Nature right you're not going to find somebody that's exactly like you you're going to find somebody that maybe similar to you which is fine but you're not going to be exactly like you so I think 1 of the things I wanted to say is is be prepared if you're if you're committed for. The transition and flex and having flexibilityand you know you want to you know you've articulated that I want to get this moving forward so I can be, um and I can move on with the things I really want to do in my life whatever that might be motivating youbut keep in mind that it is going to bring about, a change in the in you the company the organization and I think that as human beings we are all kind of if we don't say this, we're not probably honest we are all resistant to changewe are, also people that you know when when things are like this is work this way it works this way right you know and I I have this as a parent with my kids I'm like this is how I would do it why are you not doing it the way I would do it right it's so frustrating to to be a parent. And then your kid looks at you and they're like I'm not doing it that way you know and you're you're like wow it it why you know why don't you do it so as a parent I kind of think about this like I've had to grow as a person and realize wow you know this is an individual.

[32:12] Um they have some of my DNA right but they have some of my wife and but they're phenomenal people we love them but at the same time they're rebellious why are they not doing so I I don't want to like get too far into that but I wanted to say that that it it's frustrating.

[32:26] Um so you have to commit to be on the like just let go and give somebody as long as they're qualified give somebody a chance but by co-managing what I'm getting at is you can kind of reduce the overall, risk of you know hands off the wheel you take it right so how does somebody actually learn to do something you put them behind the wheel.

[32:44] And they start driving and you're like your passenger seat you're like hey turn left because it's you know danger sign or whatever and the point of that. You know met metaphor is just to say hey look you can still as an ESOP you can kind of be in bar a big part of this. In basic on the your time schedule now what can happen like okay I've seen this happen before too right you start that process you do the ESOP and then you try to jump back in the driver's seat again and that can really frustrate somebody that's a key person, that said hey you're going to give me you know you said you were going to give me the wheel you're not really giving me the wheel so keep in mind that that that definitely can happen when I talk about flexibility.

[33:24] I would also associate this management succession plan with commitment right and then and I think if you're making a commitment. To people you need to follow through on it, and if you don't then you might be left alone again you know there might be that happening so keeping that in that in mind is really going to be I think really important to build that out now the other thing you have to do is you have to as we've talked about, you know assessing leadership skills you got to make sure that you've got the right people in the right place right this is a concept that is resounding across any successful business. Um it certainly doesn't make any sense to transition those functional roles, um into the hands of people that aren't the right people right seats but 1 thing that can be that I've seen happen before is you may be the 1 person doing these multiple things and you might end up having say the.

[34:16] Potential CEO candidatebe very very good at at maybe say business development but they're really not good at operations.

[34:23] And you might decide you know what it's time for us it's the crossroads it's time for our organization to, go ahead and and promote or recruit a COO and that person could take over that piece this person could be more of a Visionary and more of the BD person more of the extroverted you know figurehead, and you can kind of think think about like you don't necessarily need everything under under 1 roof at the same time as businesses grow it is very healthy to create a dynamic seae team. That has more and more skill sets that gets you to it could be financed it could be operations it could be technology, um obviously marketing and sales all of those are obviously very important you know features in it maybe your skill set got you to this certain level so as you start thinking about the future potential for the ESOP. And the future potential for the leadership development management succession plan think about it from a growth side as well who do you need and what seats as you go. That can lead you to also say hey we really do have to recruit and build in a new spot that for somebody that we don't literally have on our team right now. Um but yeah hey we know some people that might be a good fit let's kind of concurrently work on that as we work on the esot.

[35:34] So I think that's really going to be important in the concept of of building out. And strengthening your you know future management team and getting you to a point where you're are are achieving the goal if this is your goal, to move yourself out of the day-to-day responsibility and um and be less and less um involved meanwhile sustaining the company into um pay off the things that the company is is agreeing to do which is the the debt amount that gets created at the time of the transaction. Um meanwhile creating um a new opportunity for people that, really partly I wanted to get to because I think it's not just the incentive of of finances it's why would somebody that's really good stick around andyou know this is going to be probably part of my opinion part of the of the, podcast today but it's really about this it's likeand I've had this conversation with a lot of a lot of clients and it's like I have this opportunity to sell to private equity.

[36:38] But I also are thinking about an ESOP and we're we're sitting on this kind of again metaphorical teeter totter and and they keep going back up and down right and and part of that you know I honestly I'm not. Saying any negative about it I'm actually being hopefully very positive about that I think it's super good to compare that you only get to sell your business once right so.

[37:00] You know absolutely investigating every single option and opportunity in order to check and balance you know your. Goals and objectives when you think they might be and what they really actually are right and so so keep all that in mind I think that's important but if I flip that over.

[37:16] To the key people the people that you've groomed right in your company, that are just love the culture they love the way that the company has the ability to express themselves and and innovate and and be creative and come up with like ah this is the way we're going to approach this you know and have you know that management group is used to something.

[37:39] In in an environment and when youplug in something don't worry about it it's going to be fine like a private Equity piece and say all right well well instead of answering to me now it's still the same company but you're going to answer to these guys. You know the bottom line with a strategic buyer. I mean specific private Equity is there they're motivated primarily and responsible primarily from a financial perspective so their highest priority is is going to be the results of the financials it's never going to be this balanced equation. So I think what what happens is in this as I go into the the development of leadership and management succession is that there is this.

[38:19] This mismatch of your trying these people into you want them these people to respond into you know this private Equity environment and they're like no I don't want it I've had deals okay so they go through the whole process they've done that, the deal blew up and then they realized as they've talked to their key people we didn't want that in the first place but we weren't going to tell you that because we didn't lose our job right so keep in mind and this is part what what I would say is opinion I believe that most key key people that fit your core values. As a as a company and you're considering an ESOP because you love our your culture are going to be much more excited about the future of an ESOP and this is even part of the recruiting process too because of this right because, at the end of the day.

[39:05] A human being that has the ability to and this is expressed themselves and be creative and innovate and not be subject to some you know um 100% singular metric which is how much money did you make last month. Is going to be more and more excited to be part of that company in the future, so that's why an ESOP in in you know with the intangibles of an ESOP can win over sometimes a private Equity deal which is going to have some some big multiple possibility that Nissan maybe has a fair market value multiple um that's why that that can happen and. Ultimately if you are bringing people you know down the road with you I think the question that people are going to be asking you is what is going to happen to this company in the future, and so this kind of shifts into the idea of like when do you when do you tell these people when do you communicate as a potential ESOP company your plan to your key people absolutely get asked that almost every single time when I'm working on an ESOP and I I would say it's going to be it depends right but ultimately I if I as I gravitate towards the real answer is this look you are going to need to tell them as soon as you know, for sure.

[40:20] You do not want to tell them if your flip-flopping on the Teeter Totter back and forth between that because you're you're giving them a a oh yeah we're doing this but now we're doing this you know and and you you need to know and that's part of the I think the homework for people when they listen to the podcast is.

[40:35] Is ask those hard hard questions does soul searching questions what's most important to me in my life what do I want this thing to look like in you know not just at the closing but 5 years from now 10 years from now. Um when if I'm 65 and I'm going to be 75 and 10 years and I'm like looking back did I make the right decision for not only myself but for my people, and so the sooner you can make that and we're going back to flexibility and then that keyword of commitment as soon as you can make that commitment.

[41:04] The better you can then bring your team along and say this is what we're doing bring the team along and start transitioning those roles. Um as we start thinking about that 1 of the things I love about esops is that when you do that transition you're going to choose between some partial and 100% sale.

[41:20] And that can be for a lot of different reasons of course your advisor needs to lead you through that that decision-making but the key of that. Um isn't relatively as much of the percentage it's it's the commitment towards an ESOP. And the commitment towards um you stepping down if you are designing to do that once you've sold some of your Equity or all of the equity you're going to be more motivated to start transitioning that's just going to be part of human nature I believe because, it's hard to kind of disassociate yourself from the risk of the business when you actually own it. And your subject to anything that can happen once you don't own it there's a psychology I believe that gets you kind of that place where now I'm kind of free, to do that so having said all that thank you guys for listening today and I appreciate you know the the the this kind of people listening over and over you know the years we've done it and I and I also want to encourage as you're if you are a brand new listener keep. Keep listening go to our podcast um website at journey to an ESOP uh.com you'll find a lot of episodes if you like the podcast refer it to a friend. Give us a 5-star rating and check us out on our next up on this journey to an Isa.