[0:13] Welcome back, everyone, to the Journey to an ESOP and Beyond podcast, where we seek to make all things related to employee stock ownership plans, both accessible and understandable. I'm your host, Jason Miller. And today, I want to talk about a question that I hear pretty often from owners when they first start exploring employee ownership. And it's this. Can my company do an ESOP?
[0:42] That is a completely fair question. And it usually means something like, are we big enough, profitable enough, or stable enough? Is this even a thing that would work for us? And Mackenzie and I have talked about this in other ways in recent episodes, and I encourage you to check those out. But I think it is usually the wrong first question. Not because it's a bad question. It just skips over what may be considered the more important one. And the better questions are, should your company do an ESOP? And then under what conditions? Here's what I mean. I want you to think about your business like the kitchen in your family home.
[1:39] We've all heard the kitchen is the heart of the home. It's where people gather. It's where routines become memories. It's where the actual work of feeding people turns into something bigger than food. And the meals, they matter, sure. But so do the conversations. And I think we can all think about the conversations that we have with family and with friends in the kitchen and in the dining room and in the rest of the home when people get together.
[2:16] And those conversations, those rhythms, the feeling of everyone being there together, family gets made around what comes out of that room.
[2:28] And every kitchen has the basics. Like you need a stove, you need an oven, you need a sink, you need a fridge, maybe a microwave. I think, you know, 40 years ago, no one ever thought that a microwave would be a staple in every house. But today it practically is. Maybe a garbage disposal. But the point is, there are foundational things that every functional kitchen needs. Businesses have those too strong management, financial controls clear written processes or standard operating procedures, good people, customer relationships, healthy culture, institutional knowledge, those are the stove and the sink and the fridge and the oven and that is the actual kitchen, and then as i mentioned around the microwave concept like over time kitchens change, and 20 years ago maybe you didn't need an air fryer or an instapot but now some people would act like they'd sooner part with their child than their air fryer or their pressure cooker right.
[3:49] In business, maybe that air fryer is cybersecurity, and maybe it's a specialized HR function, maybe it's a niche outside advisor, or some newer capability that the company really does need now. And maybe you need it, maybe you don't. Maybe you need access to it, but not necessarily sitting on your counter taking up space every day. And that part matters.
[4:20] Just because something is useful does not automatically mean that it belongs in your kitchen. And I'm not anti-gadget, by the way. I have plenty of them in my kitchen. I'm kind of anti-thinking the gadget is the meal, is the way that I look at it. So now let's take a step toward the transition. You built this home. You built this kitchen. a lot of life has happened there. A lot of people have been fed there. A lot of memories have been made there. And now maybe you're ready for a new season. Maybe you want to move to Florida. Maybe you want to go the other way and head to Canada. Maybe you just want to travel. Maybe you just want your life to have a different shape than the one it has now. But you care about what happens next. You care about the people, you care about the culture, you care about what continues and what gets lost. You start thinking about the transition differently.
[5:31] You've probably started asking yourself things like, if I could create liquidity without wrecking the company, well, that would be better.
[5:42] If I could preserve independence, that would be better. If I could reward employees and protect what we built, well, that would be better. If I could make the transition easier on the next group of owners, well, that would be better. Those are good questions, good statements.
[6:08] And then your investigation started. It began. And listener, I'm glad you're here. And as you get exposed to this world and listen in on what we have to share and what others in the industry have to share the the responses become you you mean an esop can do that and in that and that too and really before long it can feel like your transition plan is turned into one of those old TV infomercials. Chef Tony and Ron Popeil and every gadget ever invented for the modern kitchen, knives that never need sharpening, a rotisserie chicken machine, a food processor with 12 attachments, a breakfast thing, a dinner thing, a machine that practically promises to make all your meals while you're out at the lake pretending that you don't own a business anymore. And every single thing sounds useful.
[7:13] That's the trap. Because you can get so caught up in, look at what else this can do, that you lose sight of what the next owners actually need from the kitchen. Not every problem in a transition needs a new appliance. Picture it. Counter space, gone. Cabinet space, gone. Brightly colored, awkwardly shaped gadgets everywhere. Every device solves one oddly specific problem, but now nobody can find the silverware drawer and somehow takes longer to make a grilled cheese than it did before you upgraded everything. That is what happens when the transition conversation becomes too focused on what an ESOP can do, and not focused enough on what problem it is actually supposed to solve. Because the next owners still need the basics. They still need the equivalent of a fridge, a sink, a stove, oven, a microwave. In business terms, they need strong management, financial discipline, clear processes, good SOPs, healthy HR and culture management, deep customer relationships, the ability to make the place work without you standing in the middle of the room every day.
[8:42] That stuff doesn't become less important because an ESOP is on the table. It becomes more important. The structure can help, but the structure is not the culture. And this is really the point.
[9:00] An ESOP can be a great tool, a really great one. It can create continuity. It can help with liquidity. It can preserve independence. It can reward employees. it can support legacy, it can help ownership transition in a way that really feels deeply aligned with what you as an owner say you actually care about. But in the end, it is still a tool. It is not in any way a substitute for the fundamentals. It doesn't fix weak knife skills. It doesn't replace a family recipe book. It doesn't organize a chaotic kitchen by itself it doesn't teach the next generation how to cook just because you bought better equipment some businesses don't need an air fryer or a dehydrator or a rotisserie chicken maker they just need better knife skills and if what you leave behind is a drawer full of single-purpose gadgets instead of silverware you may be leaving the next group with more burden than blessing, more how to use videos than family recipes, more confusion than gratitude, and more complexity than continuity.
[10:21] The part I really like about the employee ownership conversation is this. If you are transitioning to employees or to the people closest to the business, there's something very human about that. Because not everybody who sat at the table was in the kitchen for every meal. Not everybody saw exactly how everything was made, but they remember what it felt like. They remember the values the standards the rhythms the conversation they help clear the table, over time some of them learned to help cook some of them learned why things were done the way that they were done, and that is what an ESOP can allow at its best, it allows continuity of stewardship it. It allows the people closest to the work to carry forward something that mattered to them and mattered to others and matters enough to you to consider this type of transition. And that's not because the structure is magic. It's not because the transaction solves everything, but because when it fits, it gives the next group a meaningful chance to keep making the meals in a way that still feels like home.
[11:48] That is why I think, can my company do an ESOP is usually the wrong first question. The better questions are, what am I actually trying to accomplish? What do I want to preserve? What does the next generation of ownership really need from me? What has to be true for this kitchen to keep working when I'm gone? And then only then ask whether an ESOP is the right tool for that job, because the goal is not to stack the kitchen with impressive equipment and ESOP should support the kitchen not become the thing blocking the counter, the goal is to leave behind a kitchen that still works a place where people can still gather still cook, still serve, still make something worth passing down. That is the difference between asking whether you can do an ESOP and asking whether you should. That is usually where the very best conversations begin.
[13:02] You've already done the hard part. You built the house. You built the kitchen. You built the habits and standards and expectations that made the place worth being in. Now the question is not just whether the next transaction can happen. It's who you want cooking there when you're gone and what you want those meals to feel like after the handoff.
[13:32] So, listeners, thank you for including us as part of your journey and for indulging me with my strange metaphors that tend to hover around food and things like this. We're very glad that you're here and that you are exploring this option for you, for your family, for your employees, and for your company. And likely in that order of priority. So if there's anything that we can do to help any question that we can answer for you, reach out to us on journeytoanesop.com and stick with us throughout this month and this year as we explore topics that we believe are relevant to folks that are in your shoes. And we're here to help. We'll see you next time. Thank you. We'll be right back.
