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Most private business owners get one shot in life to make a smart ownership transition, whether they choose to sell to a private equity investor, a competitor or partner organization, management employees or family members, or to an employee stock ownership plan (ESOP).

So it’s crucial to know you’ve investigated every possibility and explored the pros and cons of all your options.

That’s what Greg Linnemanstons, president of Weidert Group, a 100% employee-owned agency specializing in business-to-business marketing and sales services for complex industrial companies, learned when he started thinking about his and his wife’s post-ownership plans.

Selling a company can be a process fraught with conflicting interests, potential pitfalls, and seller’s remorse. But with the right mindset and the right strategic partners, it can also become a transformative opportunity — certainly for the selling business owner, but also for the company and its employees.

In this article, Greg shares key aspects of his journey from business owner to employee-owner, what his decision meant to him and his wife and business partner, Meg, and how Weidert Group has grown and changed in the seven years since they launched their ESOP.

Discovery: Why Doesn’t Everyone Know About ESOPs?

As they started to think about their retirement horizons, “It made sense for us to optimize Weidert Group’s value as a business and pursue an equity event,” because they’d built a business they really believed in. That led them to start researching options. Third-party offers were coming in from large agencies and private equity firms. A management buyout also had potential, but all of these options had some tough downsides, such as potentially being forced out of leadership, financial risk, etc.

But as ESOP Partners’ marketing partner, Weidert Group was familiar with employee ownership. In fact, a conversation with ESOP Partners’ president, Aaron Juckett, pushed Greg to investigate what a transition to employee ownership could mean — in terms of both the liquidity event and the long-term outlook for Weidert Group.

“Aaron knew exactly which questions to ask and, based on initial information, he was able to give me confidence to further explore the ESOP option and the encouragement I needed to do a feasibility analysis.” — Greg Linnemanstons, President, Weidert Group

ERISA rules require an ESOP to pay fair market value — and by law, it cannot pay more. Without an offer for a strategic premium, an offer based on a professional business valuation is likely to land on a number very close to fair market value, whether the buyer is private equity, a competitor, or an ESOP trust.

But an ESOP transaction can offer flexibility to structure financing in ways third-party buyers often can’t or won’t. And a business owner can sell to an ESOP and stay fully involved in leading the company for years or decades, where a sale contract often limits involvement in the company after the transaction.

The Difference a Trustworthy Partner Makes

In the exploration phase, one interested party pointed out to Greg that, as a note holder, he and Meg would be carrying the financial risk moving forward — where in a third-party sale, the buyer would carry that risk and the seller likely some upside in earn-out targets. But an outside buyer would also mean one very large equity event and a likely loss of control that would quickly grow in likelihood over time.

After consulting both their trusted financial advisor and ESOP Partners, Greg and Meg were able to embrace that note-holder risk with confidence. “It’s been seven years since the transaction, and being note-holders has worked out very well for us. We negotiated good note rates, and our note payments are a dependable income stream and flexible asset,” Greg said. “Everyone involved in the negotiation and sale process — ESOP Partners, the valuation firm, the attorney, our ESOP trustee — everyone was just exceptional.”

Getting the Initial Plan Design Right From the Start

ESOP Partners’ guidance in designing and implementing the ESOP was pragmatic and straightforward. “ESOP Partners’ experience instilled confidence that we were crafting a plan that would meet our goals, and we were at ease knowing we could make necessary amendments along the way — and their experts would ensure our continued administrative and regulatory compliance when we needed to make adjustments,” Greg said.

Starting off simply helped the agency avoid overcomplicating their plan while providing flexibility to look out for the agency’s best interests. According to Greg, “The ESOP Partners team continues to look out for our plan and our business with recommendations as needs and opportunities arise.”

Growing a Sustainable ESOP Company

Forecasting and understanding a company’s long-term repurchase obligation can be challenging, and Weidert Group recently tapped ESOP Partners to help ensure the agency was planning and preparing adequately to meet its obligations for ESOP distributions in the years to come.

When a company is growing, it’s exciting to watch its share value rise, but the complex and long-term implications of growth need to be well understood, and a company’s unique demographics mean there’s not really a dependable rule of thumb. Ensuring the plan is sustainable takes discipline, commitment to the values of employee ownership, and expert guidance. 

“We can trust the data, insights, and guidance we get from ESOP Partners, and that lends confidence to our strategic decisions.” — Greg Linnemanstons

Employee Ownership’s Impact on Leadership & Engagement

Now that Weidert Group’s employees are shareholders, Greg says it’s easier to have conversations with the team about goals, continuous improvement, and new initiatives. When  leadership says, “This is our company — your company — and its success impacts all our futures,” that’s true in a literal sense. 

Employee ownership informs hiring and developing employees, too. Greg makes the job offers at Weidert Group, and their ESOP gets top billing in those conversations. “We look for new hires who understand the long-term value of the opportunity to help the agency grow its value and benefit personally from that growth.”

And ownership thinking means every individual is expected to look at an opportunity or challenging situation and ask, “What can I do about it?” 

“Compared with agencies of a similar size, our employee retention rate is simply outstanding — plus, employee retention affects client retention. We measure client retention in terms of years, even decades, whereas many marketing agencies see client tenure over a single year as a major win.” — Greg Linnemanstons

“In terms of leadership, our appreciation for ESOP Partners’ value as a trusted consultant informs our expectations of any business expert and/or consultant we work with. They set a high bar for integrity and transparency — an ideal match for our agency values,” Greg said.

Weidert Group has been able to extend that same transparency to employee-owners with regard to leadership decisions, such as the bonus formula. It’s clear, disciplined, and openly shared.

“Compared with agencies of a similar size, our employee retention rate is outstanding — and I believe that impacts our client retention. We measure client retention in terms of years, even decades, whereas many marketing agencies see client tenure over a single year as a win,” Greg shared.

Seven years into its ESOP, Weidert Group’s growth has been particularly impressive, garnering recognition among Inc. Magazine’s 5000 Fastest-Growing Private Companies in 2022 and 2023. The agency has built and maintained a strong cash position and garnered positive attention from business lenders ready to help finance their future growth needs.

When they first decided to implement the ESOP, Greg and Meg were excited to see the results of the valuation, and the potential to transform their agency equity into wealth — including a second home in Door County, Wisconsin. Now, Greg says it’s just as exciting to think about what a 15- or 20-year tenure could mean for employees’ personal retirement wealth. 

A Word to Business Owners

Greg emphasizes that after a career spent building a successful company, every business owner owes herself or himself the due diligence to investigate the ESOP option. Most owners get one chance in a lifetime to make a decision they won’t regret about how they’ll exit their business, and who’ll own it next.

“With a guarantee for fair market value and flexibility to structure the sale transaction so it works best for your personal and business goals, an ESOP deserves equal attention to other options,” Greg said. 

“The second point I’d make is that an ESOP sale will keep you involved past the sale, making it a great option for business owners who are ready for the liquidity event, but not ready to retire. Those looking for immediate distance from the business may have other priorities, but for business owners who love what they do and want to keep doing it, an ESOP deserves attention.”

If you own a marketing agency or similar professional services company and you’re considering your exit strategy, you deserve to know what an ESOP could do for you, your employees, and your company. Download our free visual guide today.

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