Strengthening Small Business Through Employee Ownership

Small businesses are the backbone of American communities and form one of the nation’s most trusted institutions. Restaurants and retail stores on Main Street, auto repair shops, construction contractors, daycare centers, beauty salons, barber shops, and various service-based businesses, among others, are a key part of the social and economic fabric of America. But they face a number of challenges, including accessing capital, high overhead costs, market development, talent recruitment and retention, and succession. In this discussion from the 2025 Employee Ownership Ideas Forum, panelists discuss what employee ownership looks like in small businesses and how employee ownership can increase their strength and resiliency.

For video, speaker bios, and additional resources, visit our website: https://www.aspeninstitute.org/videos/strengthening-small-business-through-employee-ownership/ 

Or subscribe to our podcast and listen on the go: https://creators.spotify.com/pod/profile/aspeneop/

For other session videos, visit the Aspen Institute Economic Opportunities Program on YouTube: https://www.youtube.com/@aspeneop

The 2025 Employee Ownership Ideas Forum took place on April 9-10, 2025, virtually and in Washington DC. The Forum is proudly co-hosted by the Aspen Institute Economic Opportunities Program and the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers University.

This year’s theme, “From Workers to Owners,” highlights how the experience of ownership changes the reality of work for workers. The forum highlights companies in a range of business sectors and explores how employee ownership fits their business strategy and approach to business leadership. We also discuss the particular role employee ownership can play in supporting business success, and we consider the role institutional investors can play in improving capital access for employee ownership conversions and expansions.

For more information about the Employee Ownership Ideas Forum, including our speakers, agenda, and additional resources, visit our website: https://www.aspeninstitute.org/events/employee-ownership-ideas-forum-2025/

Episode Transcript

(00:04):
So I'm very happy to be introducing this next session,
strengthening small businesses through employee ownership.
This is a topic that we've been spending a lot of time
researching at Rutgers. Actually, we just published a
report that identified approximately 140,000 firms
could be candidates for an ESOP.They're hiring 33 million

(00:26):
employees and approximately 1.1 million firms are possible
candidates for a worker cooperative hiring 22 million
employees. So there's a pretty big gap,
right? We all know that we're under
7000 Esops, under 1000 worker cooperatives.

(00:47):
So there's a tremendous opportunity.
And then of course, we're familiar with the Silver tsunami
and the need to to make some quick decisions.
Certainly, I think building awareness is a very important
next step, providing financial assistance.
But I've been researching this for quite some time and I think
one of the greatest opportunities is to help prepare

(01:10):
these businesses to continue to grow to be eligible for an
effective buyout. So what does that mean?
I think it means providing assistance that many more
sophisticated firms have available assistance in
developing A succession management program.
How do you identify and develop that next leadership team?

(01:31):
Designing and implementing effective financial,
operational, HR, governance, management type programs, you
know, these are the things that I think could help many of these
businesses get to the point where an effective buyout
strategy could be implemented. And we've been partnering
luckily with here in New Jersey with the New Jersey Economic

(01:54):
Development Authority trying to address all of those issues.
The Governor's office has provided financial support for
us to continue building awareness.
We're in the process of expanding our educational
programs designed for business owners, employees as well as
business advisors. And then NJEDA is in the process

(02:16):
of implementing a program where they will be providing some
financial assistance for business owners that are looking
now to implement an employee ownership strategy, helping to
finance feasibility studies and related expenses.
So hopefully we'll get an opportunity to move this needle.
And I'm very happy to also introduce our distinguished

(02:39):
panel on this important topic. We have Kevin Clegg, CEO of
Clegg Auto. We have Rachel Hottenberger, CEO
and Director of the Parman Holding Companies, Sean Tambor,
Matthew shareholder at SCS, ESOPStrategies.
Our moderator is going to be Anne Claire Broughton, Founder
and Board Vice Chair of North Carolina Employee Ownership

(03:01):
Center. And we'll have some closing
remarks from Lauren Rogers, the Executive Director at NCO.
So, Anne Claire, it's all yours.All right, thanks so much.
Hopefully we don't have too muchof the post lunch lol.
We'll try to keep you awake. So I do represent the North
Carolina Employee Ownership Center.

(03:22):
We also have Iowa here. You heard from Leslie earlier,
as well as Washington State and Steve Storkin from the Employee
Ownership Expansion network. So our mission is to spread the
word about employee ownership asa win, win, win for business
owners, workers and communities.We see a ton of small businesses

(03:43):
at the center, so very excited to be part of this discussion.
I wanted to just set the stage by defining what we mean by a
small business. The SBA defines small business
as any business smaller than 500workers, but I think we see a
lot that are considerably smaller than that.
But small businesses are the lifeblood of our country. 99% of

(04:05):
businesses in the US are small businesses.
There are 35,000,000 small businesses in the US.
They employ 46% of workers, which is about 59 million
people. They make up 43% of our GDP.
And they are the businesses we all rely on, the pharmacies,
beauty salons, restaurants, retail, daycare centers, small

(04:27):
manufacturers and many, many other businesses that we rely
on. And so with this silver tsunami,
if they don't have a child to take over or a ready buyer,
they're at risk of shuttering. And that will be a huge loss
because locally rooted businesses circulate $0.70 on
the dollar in the community as opposed to $0.30 if they're
owned elsewhere. And those are the businesses

(04:49):
that are part of the little. They sponsor the Little League
team and they're part of the Chamber of Commerce, and they're
just rooted in our communities. So they're very, very important.
I did want to quickly mention that we have an ESOP company and
an employee ownership trust represented here.
The other form of employee ownership that we heard quite a
bit from Doctor Jessica Gordon Emhart this morning is a worker

(05:12):
cooperative and those are also super important and they can be
very large. Like Adrian was talking about
cooperative home care associateswith 2000 employees, but we also
have very small ones. So we've done several
conversions to worker co-ops andthose are on the increase.
We've done businesses as small as five employees.
So those very small businesses are also represented here.

(05:37):
So with that, let's turn it overto you.
Rachel, can you tell us about your business and how you got to
this point? Sure.
I'm Rachel Hochenberger with Parman Holdings out of
Nashville, TN. Our company has been around for
90 years. We've been employee owned for 10
years. How we ended up in ESOP is we

(05:59):
had two owners who were pretty much absent on the day-to-day
and they were aging out. They had children in the
business, however, those children were smart enough to
know better and stayed out of it.
So they needed to do something with their business and they did
look at all avenues, private equity selling to other private

(06:21):
owners. And they kept coming back to the
fact that the employees were theones who had made the business
as successful as it was. And they took a haircut on
selling the business to the employees 10 years ago.
And that's how we became an ESOPtoday.
So our business is, we, our heritage business distribute

(06:41):
petroleum products about 50 million gallons a year.
We do about 300 million in revenue.
We diversified six years ago outof necessity into construction
and agricultural equipment. Then it was like blood in the
water. So we kept, you know, going
after small diversifications to strengthen our portfolio of

(07:02):
companies. And did you say how many
employees you have? We have 200 employee owners.
Fabulous. And Kevin, how about you?
So my journey started, I guess, with starting up an auto repair
shop with my brother in between undergrad and grants grad
school. When I went to grad school, I, I
studied organizational behavior work design and went off into

(07:24):
the to the big corporate world and, and spent time with
Honeywell, Jacuzzi, Pulte Homes,USAA, some big companies learned
a whole lot of good stuff. My brother said, will you come
back and join me now that you'velearned how businesses really
operate? And I'm like, I don't know that
I'm bringing a whole lot back from there that we want to use,
but I, there is some. And if I do come back and join

(07:44):
you, you have to promise that wesell to employees.
And he's like, what do you mean?I'm like, I don't know other
than I've watched way too many transactions take place and it
seems like the forgotten people are our customers and employees
and it just doesn't seem right. So if we agree to build this
thing up and grow it, then we'llsell to employees.
And then in the COVID year, for some reason, something clicked

(08:07):
that said, what if employee ownership was an operating model
and not an exit strategy? Like what if we just started to
operate inside of this? Because right now we're already
doing great things for employees.
We have some form of profit sharing, but as soon as it
transitions to employee owned, then we're engaging everybody in
a different way. We're engaging everyone and, and

(08:27):
not just sharing of profits, butin sharing of leadership
responsibilities. And the things that could happen
and could change from doing thatcould be significant.
And he said, OK, let's do it. I crazily told our employees
like almost immediately thereafter, we're going to
switch to employee owned. And they're like, cool, what
does that mean? I'm like, I don't know, but
we'll figure it out. So I told him it'd probably take

(08:50):
a quarter, you know, like 90 days or so.
And they're like, OK, whatever. And, and then I studied ESOP
because it's the only thing I knew of, of, of employee owned.
And I decided there were some things that just inherently
weren't going to work for us to go that, that route.
And a lot of our things that were talked about today, the
complexity, the, the cost, the prevention of acquisition,

(09:10):
there's, there's some things that just didn't seem like it
would fit for us. And so we, we did a research for
a couple of years and used a local university students to
look at different forms of ownership and, and what those
look like. And we looked at co-ops and, and
then learned about EO TS. And then unfortunately there was
almost nobody in the US. Well, we couldn't find anybody
in the US that had EOT research.And so we went to and got

(09:31):
information from the UK and other places in Europe and put
in place a perpetual purpose trust.
And so it took us about two years to kind of research,
figure it out and then put one in place.
And then we went live at almost three years ago in that, in that
in a employee ownership trust. Did you say how many employees?

(09:51):
60 employees and general, General automotive and repair,
three of those stores and then one store that's a Body Shop.
Fantastic. All right, Sean Tomba, tell us
about SES, ESOP strategies and your work with small business.
Great. So my name is Sean Matthew.
I am an attorney and I work on ateam of nine attorneys and seven

(10:12):
investment bankers that help structure ESOP transactions
across the country. Our, our firm has always had a
mission oriented approach to this work and that, you know,
our, our motto, sort of, you know, we're going to create and
maintain successful and sustainable business transitions

(10:32):
to employee ownership. And it, you know, it runs
through how we advise our clients.
It runs through how we expend our time sort of helping to
build the ecosystem, whether it's, you know, working with
folks like Steve Storkin at the Employee Ownership Exchange
Network and, and my colleague Jim Stecker being one of the
founding board members there. It's our work with Rutgers and

(10:54):
which we'll touch on a little bit later today.
And it's also at work, you know,just sitting and talking to to
really cool and interesting people.
And over the last several years,we've been able to meet some
really cool and interesting people that I'll talk about a
bit later who are trying to do the work of 10X and employee
ownership throughout the countryand trying to deal and bridge

(11:14):
those gaps that are preventing Ascaling employee ownership at
the end of the day. Fantastic.
And we know that employee ownership can really solve for a
lot of problems, as we've heard from both Rachel and Kevin.
Can you talk about some challenges implementing Aesop's,

(11:34):
in particular with small businesses and maybe how you've
overcome those? Yeah, no.
So essentially, yeah, we see 3 gaps that are really a challenge
to scaling employee ownership through Esops.
Once a cash gap, once a time gapand then they learn the other
ones, the truth gap. So I'll start with the truth gap

(11:54):
first. You know, we heard a lot today
about how Esops are complex and,and they are sure complex.
But yeah, I think it's importantto understand that in context,
right? Anytime you're selling a
business, that's a really complex process, requires a lot

(12:16):
of underwriting, a lot of time you're hiring and talking to a
suite of advisors, you know, attorneys, investment bankers,
accountants and others who are helping you walk through the
process of transitioning your business, right?
And, and so, well, well, yes, Esops are complex.

(12:36):
They're, they're not any more complex than your typical third
party sale. It's just that the seller tends
to be a little bit more exposed.So you know, the, the, the
making of the sausage on the transaction side than your
typical deal, right? I think that kind of puts off
some sellers, especially given the fact that this is probably
going to be the first and last time they go through a material

(12:57):
transition if they're selling 100% of their business to an
ESOP, right? You know, typical third party
sale, you know, you're dealing in an adverse situation where
you're doing a ton of diligence of QOV and whatnot, but you're
also having to go through the process.
You're not having to go through the process of finding the
banker that's going to help finance your transaction, right?
You're relying on the buyer to do that and relying on the buyer

(13:19):
to bring the capital to bear in the transaction.
And I think you know, some advisors in the ESOP space, I
mean there are a lot of nerds, myself included here.
We don't have great pick up lines and we kind of lead with,
hey, Esop's are really complex, you need to hire us And it's
it's like, you know guys that that's not the thing to do.

(13:42):
You know, the way that we like to frame it for our clients is
that look, this is going to be no more complex than your
typical third party sale transaction.
Actually, at the end of the day,it's going to be a little bit
easier, certainly not as adversarial, right, because
you're working with a trustee that you're going to hire that's
going to negotiate on behalf of the ESOP participants.
And you know, I think this is where, you know, depending on

(14:05):
who you talk to, right, what what is what is Esoppable as in
like what companies can actuallybe Esopped changes from provider
to provider based on what their minimum feed requirement is.
And that now we're pretty eclectic bunch of folks.
If you've met, you know, our founder, Jim Steiker, if you've
met our president, CEO Ed Reniger, you know, great guys

(14:27):
with lots of thoughts and opinions about how to maintain
and make sure that employee ownership and throughout this
country is, is scaled and is done so in the right way.
And we take that approach to howwe advise folks and say, hey,
look, you can do an ESOP transaction with a company that
has 20 to 25 employees, has 1,000,000 bucks of EBITDA,
right? And and that's probably like a

(14:48):
soft floor, right? You can have a conversation
there. There are a lot of folks who
won't touch that size of deal because that's not how they're
that, that's not how their firmsare structured.
And we get that. But from a mission perspective,
we're going to work with every esoppable company that's out
there. Now, most of our clients are not
that size. We wouldn't be as big and as
profitable as we are as a firm if we were just working with

(15:09):
those companies at that level. But we're work we willing to
work with companies at that level because we believe that,
you know, the ESOP structure is,you know, tax advantage in a way
to create a perpetual capital structure that can really be
used to leverage of the wealth of employees in an incredibly
unique way. And so you know, the truth

(15:30):
aspect of it, the the getting some clarity as to like, what's
he stoppable? What's the art of the possible
and helping folks understand that.
I think it's a huge issue in thespace.
And I think think you know, I think, you know, Bill, the folks
at Rutgers, the folks at projectequity and CEO, you know, Aesop
association and other organizations who are trying to
make do the work of building that awareness and trying to

(15:53):
dispel some of those concerns around the complexity piece.
But and and so look, we're we'requite successful.
We've did 26 ESOP related transactions last year.
Of those transactions, about 20 of those were either second
stage ESOP deals or new ESOP formations.
And so we have a lot of owner operators who are willing to

(16:13):
take that 7 to 12 year seller note and say hey, we'll wait.
We'd like the returns on the notes.
We'd love the fact that I get torun my company basically like a,
you know, tax free for however many years.
You know, I get paid off and I get to keep the business in my
community. I get to keep the culture.
That's how to help the businesses be successful.

(16:35):
But for a lot of other business owners who are simply putting
their business out to market andhiring of the business broker
and investment banker, when theyhear about the fact that they're
only going to get anywhere from maybe, you know, 25 to maybe 45%
at the very high end of their, their purchase price and cash,
they're like, hey, I don't want to, I don't want to, I don't

(16:57):
want to wait around 712 years toget fully paid for the company
that I'm selling. And then the other piece of that
is I don't have 712 years. I want to retire.
I've got my management succession in place.
Like I don't want to stick around that long in order to
fully see my exit. And So what we've been fortunate

(17:18):
to work, to be able to work within our team is a few very
innovative clients who have said, hey, let's try to bridge
that cash gap, let's try to bridge that time gap, right?
And so we mentioned, you know, Aprison, Heritage Capital
Partners, Todd and Phil, you know, we talked to them starting
like five years ago when they were coming up with this super

(17:38):
interesting novel concept of their private credit fund.
And what they've been able to dowith now 5 portfolio companies
is bridge that cash gap and thattime gap for sellers throughout
the country and targeting companies that have a lot of low
to moderate income workers and creating structures that are

(17:59):
designed to be permanent employee ownership structures.
And I think that's really important, you know, with a lot
of capital that's being brought to bear in the space, right?
That's great. But we want to make sure that
when we're talking about employee ownership, we're
bringing the capital to bear to make sure that the employee
ownership is designed to be permanent, not a quick exit,
right? And there might be some
situations where you can use an ESOP for certain types of

(18:21):
companies that are, you know, large cap companies or super
large companies where the basic ESOP fundamentals just don't
quite work as well. But for your lower middle market
and middle market companies, if you're raising capital, you
should do it in a way that ensures permanent employee
ownership, right? And so, you know, being able to
work with them, but you know, that's, I mean, they are, you

(18:45):
know, inspiring others to raise funds and whatnot.
But we also see folks like SE Acquisition Capital, Mike
Morrissey and Mike Brady who areout here, you know, saying, hey,
you know, why not we not, why not take the search fund
approach that we see all over the place where the economics to
the searchers in the context of a typical search fund approach

(19:06):
where you go out, you know, yourfundless sponsor, you go acquire
business and then bring capital to help facilitate that
acquisition either through debt or some equity.
Why not let the ESOP be the equity holder and be designed to
be the permanent equity holder in that situation?
And let's bring the sophistication to the business
to help transition it away from its founder from a row, from its

(19:29):
owner operator to help scale it over time so that, you know, as
it starts to deliver, it can also think about things like
acquisitions, do things like that, that that Rachel does with
her company and in terms of scaling and growing and whatnot
and provide real value to the employee owners of of lower,
lower middle market and middle market companies, right?

(19:52):
And so, you know, we see, you know, when we see those gaps,
there are now opportunities. Folks are being innovators there
who are looking to do the work of trying to bridge those gaps
that can really 10X employee ownership at the end of the day.
Fantastic. And you kind of led into the
next question. I'd love to hear from Rachel and
Kevin some of the ways that employee ownership has really

(20:14):
strengthened your business, yourcommunity.
Are there any sort of small business problems that's helped
you to solve? Go ahead, Rachel.
Thank you. So just going with the community
part, you know, one of the big things about not selling to
private equity, which private equity is not bad, but in our

(20:34):
case, allowing those employees to stay within the community and
strengthen that community, not removing the business and
bringing it to another part of Tennessee or somewhere else in
the country. That was very vital.
We have a lot of blue collar workers.
Most of our workforce is made-upof drivers, mechanics or

(20:56):
technicians. So those folks being in the area
and then our company does a lot of philanthropic activities.
If you visit any of our web pages, you'll see the Parman P
is our logo and we put that on anything a child socks,
headbands. During COVID, we had the masks
with AP on it. My children, they, we, we mark

(21:20):
everything with the Parman P. So someone will ask about it and
then we can explain that we're employee owned and this is the
things that we do. We also go into some of the
local trade schools and try to recruit from that level and
explain what their possibilitiesare once they become an employee
owner into their future. And so that's just part of what

(21:43):
we we do. As far as communities concerned,
the small C-Suite team we have, we spend a lot of time at our
locations and in those communities as well.
We we are in the Southeast and in Minnesota.
There's a story there that is too long to share in the
setting. So that's how we kind of impact

(22:05):
the community in a short answer.And then as far as being
employee owned, it is not easy and it is confusing and it'll be
great once we can get like, you know, the shortened version of
that down pat. However, what we've seen is a
lot of employees after Year 5, and I know that was said

(22:26):
yesterday and we firmly agree with that.
They really began to act like owners of the organization.
And you see when you hit, when atruck driver who's been driving
a truck for 40 years suddenly comes in and lets you know that
something is broken, you got something good going because
what's been happening is it's broken and they don't care about

(22:48):
it because it's not impacting them.
Now they realize it is impactingme.
Whenever we have a worker's compclaim or some other tragedy,
it's going to impact me and you,that kind of thing.
So it it has been a behavioral change over the past five years.
And then as they see that share balance start to creep up, they

(23:10):
act more like an owner. And even through acquisitions,
you know, they want to see the growth, not that it's going to
be a distraction from what we'redoing, but they understand that
the more that we grow, there's going to be more opportunity and
then more dollars going into their ultimate retirement
account for wealth. Generation.

(23:31):
So that's great and I'm going togive you a chance, Kevin.
But first, is your turnover reduced?
Is your retention increased? So our retention has increased.
If we could track it based, if we did track it, I'm sure we
could. If we were to track it based on
everyone up to five years and then everyone else, it would

(23:54):
send two different messages. But for a company of
predominantly blue collar workers, our turnover rate is
about 6%, which is kind of unheard of.
You know, with drivers, I don't know how many of you have
workforce full of drivers. The majority of our workforce is
drivers. Those guys get out at the

(24:15):
terminals, which is where you get your fuel from, and they all
talk about how much money they make.
You just can't stop it. And that's terrible because for
$0.10, normally they'll go somewhere else really quickly.
And so you, you battle that. I mean, we had pizza on Friday.
Well, I'm going to leave and go where you are because we didn't

(24:35):
have pizza on Friday. So it it is extremely
competitive, but 6% is a pretty good turnover rate for what we
do. Fantastic.
All right, over to you, Kevin. So we transitioned to employee
ownership and right off the bat I realized that people are
looking at me saying, So what? Like we're an owner now you've

(24:58):
told us things are going to happen, but what does it even
mean to be an owner? And I didn't sign up to be an
owner. I just want to fix a car.
And I'm like, interesting. So what does it mean to be an
owner? And we spent the next year
designing and, and putting together a curriculum that looks
at first, what does it mean to own your life?
And then what does it mean to own your career?

(25:20):
And then what does it mean to bean owner in a company?
And we decided that this had to be done at a level of like,
let's take like 7th grade reading level and blue collar
mechanic and that doesn't want to engage that just wants to fix
a car, right. So in designing that, what we
landed on is that you, when you talk about what matters most to

(25:42):
somebody, anybody can have that conversation.
And so we engage everybody in a dialogue and discussion
facilitated that gets them thinking about the things that
matter most to them in their lives.
And at the point that you've identified some of those things
that you then make a conscious choice to put more energy
towards those things. And if you choose to do that and

(26:03):
you do it, you are owning your life.
And that's the starting point ofbeing an owner.
And if you can't start with that, you're probably not going
to get much further. And we tried the the most grumpy
ornery mechanics in the company and a pilot project and take
them through the training. And when we finished, they said,
I've never done anything like that in my life.

(26:23):
And I don't know that I want to share in my answers with
anybody, even my spouse. But that was worthwhile and
everybody in the company should do it.
And so we figured we're on to something there.
And then we took that to then owning your career.
And most people are waiting for their manager to tell them how
to own their career as opposed to really owning it themselves.
And so the connection point thatwe made there was if your career

(26:45):
is not helping you on the thingsthat matter most in your life
that you've chosen to own, then you should do something about
it, whether that means doing something to love what you do
now or leave and do something else.
And that was really impactful for everybody, even more
impactful because now they couldkind of relate their job to this

(27:05):
ownership thing. And then the last step is if
you're still here, then it's time to be an owner in the
company that's shared. And at that point, we all commit
together to our values, to generating cash and to
satisfying the customer and improving in our skills that we
bring to the table was the only thing, four things that matter

(27:26):
as a shared owner in a company. And so we do workshops to
understand how we impact cash, how we impact customer, how we
improve on our skills and how welive our values and how we hold
each other accountable to that in in launching that, I can
definitively tell you that I have a company that's full of
people who care. And when you ignite the care
factor suddenly works, not work.Suddenly it's something I look

(27:48):
forward to. And then when you come home from
work, suddenly you have energy to give to your community and to
your family. And that changes massive amounts
of lives. And that's the beauty and the
power of employee ownership. That's fantastic.
Thank you so much. I think that's what drew many of

(28:09):
us to employee ownership is stories like that.
So we are seeing a lot more small businesses form holding
companies for various reasons. And so I'd love Rachel for you
to talk about why Parman went that direction and what
advantages it gives you. So we did not start out of the
gate as a holding company platform.

(28:32):
And like I said, we distribute petroleum products, which is
fossil fuels and it's expensive to purchase that and get it
distributed and get the cash back from those customers.
We 10 years ago, I don't know that everyone going into the

(28:54):
ESOP model counted the cost of what was going to happen the day
after you became an ESOP to yourbalance sheet.
But we found out the day after we became an ESOP what was going
to happen when we suddenly had abunch of negative equity.
And the suppliers, credit analysts also found out and they

(29:16):
let us know all about it that wewere in trouble because we had
negative equity. And although they had been
supplying the company for 60 years, what have you, that they
were not doing it anymore. And so that was a, a big
situation that we had to deal with.
And for a couple of years, we tried to educate and pivot.

(29:38):
And I mean, you know, credit analysts, they're doing their,
their thing that's they're filling in the blanks and you
don't fit in the circle anymore.And we had to figure out a way
around it and through the process of, you know, if we do
this and we move this here and that's kind of how the idea came
up. So our holding company was
formed, we move the ESOP to the holding company level.

(30:01):
And so that was about year 3 or 4, which kind of changed the
flavor because it took a lot of the burden off of our day-to-day
conversations with fuel suppliers.
And then we were like, hold on. Strategically, this is one of
the best decisions, decisions we've made because now we can go

(30:22):
out and acquire other companies that can fall under the ESOP
umbrella and then we can have financial statements that shows
true operating company performance.
It happened because out of necessity and it was a great
thing for us as the days went onso.
And you mentioned it helped you diversify.

(30:44):
Yeah. So after that, so we had done a
couple of acquisitions in that first five years and I don't
know if any of you have been acquisitive, but in acquiring a
company and bringing it into a current platform, there's a lot
that goes into that. It's it's almost a disruption to
business. It's a big disruption to

(31:06):
business. And so that six, six years ago,
our fourth year in, we decided to diversify and we found this
construction agricultural equipment business that was for
sale. We didn't know anything about
it. We didn't know the market.
So we went into it very blindly and what we found was you didn't

(31:27):
have to have the same ERP, you didn't have to have the same
people. We could use the holding company
employees. So we got a lot of synergies
from that and kind of gained some headway and with the intent
of balancing some of the burden on that existing operating
company and kind of taking the pressure off of it in case there

(31:50):
were seasonality or something else which occurred and it
became profitable out of the gate.
Four or five years in, it makes up 60.
It makes up 40% of our overall value of the company.
Nice. And Kevin, you're also a holding
company. Can you talk about how that
works and what's your vision forit?

(32:11):
So where we're going now that we've understood kind of how to
ignite that care factor and employee ownership spirit inside
of what we're doing and it's working with two great results.
How do we make that accessible and and scalable and truly to
small business, which I'll go away less than the 500 person

(32:31):
company, I'm talking like 10 person company like the majority
of small businesses in America. And because a lot of these
models and frameworks aren't going to work.
But what we're putting in place is a revision to our trust to
where it's going to be availablefor other people to join our
trust and share in our purposes.And in doing that, they don't

(32:53):
have to, to experience all the costs.
And then we'll maintain separateholding companies that are C
corporations that will have independent financial boards and
independents so that the different sequel and no, no, no
one holding company can take outanother holding company.
But you create a network of all these holding companies and
these holding companies are sector specific, industry

(33:15):
specific. So the power of roll ups, which
PES are doing it because there'spower in roll ups, but instead
of selling it at the end, these are all held in perpetuity.
And so you have the autonomy of businesses that get to operate
independently as long as they live by the purposes only.
So you're taking the power of purpose trust, you're taking the
power of holding companies and shared services, and then you're

(33:37):
leaving the the independence forpeople to operate per those
purposes only. So you've getting, you're
getting the best of a whole lot of different things and putting
it all together. Now we can go to a small
business hunter and say when we have a holding company in place
for a specific service sector like we're an automotive today
and we know that market really well.
So we're going to start growing in that market, but we'll go get

(33:59):
an electric hold company put in place with a professional that
knows that they will start acquire small businesses, those
owners that want to keep their employees employed, they want to
keep their services in their community.
And now there's a transition path.
Even if they don't have a successor, that person who knows
the industry knows how to hire somebody.
They know how to support that new leader who doesn't know the
industry and how to operate in that industry.

(34:21):
And now suddenly this idea of employee ownership, employee
ownership is accessible to literally any small business
with it being affordable and succession planning built in
place inside of it and the powerof a network that's constantly
collaborating and connecting together.
So that's the vision of where we're going and we're getting
ready to to launch that here hopefully in this next year.

(34:43):
So. That's great, I love that.
Another way for businesses to become employee owned.
So Sean, you are on the board ofEmpowered Ventures, which is
another ESOP holding company. What do you see as the potential
for this model? Yeah.
So and just as a little bit of background on Empowered
Ventures, it's a diversified ESOP holding company that is

(35:06):
headquartered in in Indiana. It's got a fabric distributor, a
sort of a parts manufacturer, a children's furniture company
for, for schools now and a plumbing company.
I'm missing 10 an RV parts manufacturer all wrapped into 11
holding company. And, and the idea there is to,

(35:29):
you know, diversify the, the holdings of the legacy operating
company that had formed the ESOPand to grow employee ownership,
right? And especially in industries
where there isn't necessarily a path to inorganic growth through
acquisition or organic growth, that can really, you know, make

(35:52):
use of the, the, the returns that you're generating as an
operating company, That model helps sustain and, and scale
employee ownership, bring it to other individuals who, you know,
quite frankly, would not receiveit because the owners were going
through, again, a typical third party sale process.
And, and, and the, one of the things that we see, I know that

(36:13):
was mentioned earlier that if you're in an auction process or
something along those lines, that, you know, you're going to
be the, the top better, you know, wins out.
That that's not our experience there.
And I think that's one of the interesting things is that the
storytelling around employee ownership is super important and
really resonates with business owners.
And most of these business owners, again, you know, they
haven't heard about the ESOP contact concept.

(36:34):
They're looking to retire, they're looking to exit their
business. And when they hear about the
story of employee ownership fromChris Frederick's or from Rachel
or for Kevin, from Kevin, they're like, hey, no, this
really resonates. And I, I want to sell my, my
company to these folks so that my, my, my employees can now own
the company at the end of the day.

(36:55):
And for these business owners, it takes off the burden of the
ESOP administration that these companies would have to take a
board, you know, from a regulatory perspective and
understanding that, you know, they're not engaging in a
transaction directly with the ESOP most times, Although there
are some circumstances where if they want to take advantage of
the tax benefits there, they they can do that.

(37:17):
And it makes it much more traditional third party sale.
So again, you're not seeing all the sausage made with the bank
lenders and everything like that, like you would in a
standalone sub concept. So, you know, I, I think it's a
great way to help scale on employee ownership.
And I think, you know, for thosewho are allocating capital, you
know, you know, investing in andthe powered ventures, investing

(37:39):
in other holding companies are looking for capital who can't
simply rely on their, you know, lines of credit or other bank
financing to facilitate, you know, opportunities that come
their way. I think it's a great way to
scale employee ownership. And, you know, I think it's a
place for for some innovation. You know, you think about your
small businesses in a community that might be, you know, focused

(38:01):
on that certain anchor institutions.
You know, having a place Spacey stop holding company model might
be a great initiative for a Community Foundation or someone
else to sort of take a board andestablish to help facilitate
employee ownership transitions. Where you have a large enough
sort of port, you know, platformcompany that could take aboard
the ESOP structure on in a, you know, more traditional sense.

(38:23):
But adding on smaller businessesthat might not quite be
stoppable or might be stoppable,But you know, there's not the
appetite there from the seller to really take aboard the the
administration aspects of it or the time gap issues that they
might have face at the end of the day.
That's great. I'm so excited about this model.

(38:43):
Well, Speaking of innovation, you're doing some other cool
projects, Sean, you've been involved with Rutgers
initiatives to reach out to black-owned businesses around
employee ownership. Can you talk about that work and
what you're learning so far? Yeah.
So for the past several years, I've had the, the, the joy of
working with Bill Casiano and Andrew Sharf at Rutgers on a

(39:05):
Kellogg Foundation funded project that focused on both,
you know, sort of black businessowners initially, but it's
expanded to work on business diverse or underserved business
owners, women business owners, other business owners of color
and whatnot. The first step in that was to
create an online sort of curriculum of, you know, saying,

(39:25):
hey, here's employee ownership, here's what it means, here's
what the financing looks like, here's what the process looks
like. And, and to create a resource of
that online for, for business owners and kind of roll that
out. I think that a couple years ago
now what we're doing is doing some additional work now to
engage advisors who are working with minority business owners,

(39:47):
who are working with women boneless owners to really bring
them aboard. You know, either educate them or
provide them with resources thatwill help their help their
clients better understand the employer ownership transition
options. And we're also dealing with
issues with, you know, certain certified minority businesses
and whatnot in a partnership with the NCEO, which I'll let

(40:09):
Lauren speak about a little bit later, that we're very excited
about to deal with some of the valuation gap issues that
minority business owners face, especially when they're looking
to transact, trade their business, go and retire, yet
they're relying on their certification as a minority
owned business to generate revenue.

(40:29):
There's a nice path forward for that now that we're working on
with NCEO. So, you know, very exciting
stuff. Nice.
I'm looking forward to hearing about that.
Well, Kevin and Rachel, are there any things that you would
like for those of us working in employee ownership or funders or
policy makers to know about how to best support small businesses

(40:49):
in converting to employee ownership?
I guess recognize when I look atsmall business again, I'm not,
I'm not looking at the 500 or 100.
It's the, it's that 5 to 10 person in and most of the
solutions aren't going to fit atthat size.
And so if we really want to makemeaningful impact, if we really

(41:13):
want to see a 10X or 100X happen, which I think we're
primed for that to, to be the case.
There's so many positives. Everybody just nods their head
when you talk about all the merits of it.
We've got to find solutions thatare these types of connecting
solutions that that take costs way down and make it make, make
it possible. And for, for for owners to

(41:35):
actually see that they don't have to do it themselves.
Like when, if any of you've started a business and you put
all those hats on and you feel what it feels like to suddenly
be responsible for, for employees and you have to figure
out accounting and you have to figure out hiring people and you
have to figure out marketing your business and all these
things add ownership onto that employee ownership.
It's just too much. And so simplified connecting.

(41:59):
I can tell you there's lots of employee owners out there that
are tired. They've, they've, they're
working so hard. And if we give them options of
and help them figure out how to unite together and connect
together a little bit and share in some sort of an employed
ownership platform, they'll, they'll bite.
And so we got to start thinking about some newer options and not

(42:20):
the traditional ones that are onthe table.
So in 2023, our company won Company of the year in the
Southeast chapter through the ESOP Association.
And I am naturally an introvert and was not informed that I was
going to have to say anything when we took.

(42:41):
I thought it was just like, get the trophy, get back on the
airplane, go home. And and so, you know, they gave
the glass thing, took a picture,and then they're like, now you
have to say something. And I was not prepared.
So I said running a Aesop is notfor the faint of heart.
And that was the end of it. But nobody laughed.

(43:02):
And so since then, I have tried to add a little color to that
because running an Aesop is not for the faint of heart.
It requires a unique group of people, the, the C-Suite, the
management team, the advisors, it, it really requires people

(43:23):
who are kind of selfless to be in that position.
And we became an ESOP because the owners needed a succession
plan. They did have children in the
business. One of the sons still works for
the company today and is thankful that he didn't take the

(43:43):
burden, was not enforced to takethe burden.
And so looking back in time whenwe did the transaction, I was
the controller. And now in my position, I have
the opportunity to talk to companies looking at options
for, you know, their next steps.And they asked me, like, you
know, what would you say? And I always say, do as much

(44:05):
homework as you can, you know, and get an advisor and then
listen to what your advisor saysand then look up all the other
things that they're not telling you.
Go to as many conferences, get well educated on what your
options are and so on. And I think it was said best
earlier by Tammy and Phil Reeves.

(44:26):
They had all the points right there.
It is complex. I think everybody knows it.
And I think everybody's looking at how to make it less complex.
And then in our position, if youare not capital intensive and
you have a lot of cash, good foryou.
We didn't. So it took a long time for us to
kind of overcome that burden. And you know, now even now

(44:50):
growing the company, we're always looking somebody asked
like, how did you, how do you finance your acquisitions?
Do you, do you do this? Do you?
And I'm like, yes, anything we look in the couch cushions, you
know, take the pennies out of the loafers, everything to
finance, finance acquisitions out of necessity.
So I think making access to capital easier and cheaper and a

(45:14):
lot of educating those coming into the space so that their
setup is right for their employee owners and that they
totally buy in and believe it. Because what you don't want is
anybody being two or three yearsin going like this was a
mistake. So.
Anything else any of you want toshare with the audience before

(45:34):
we open it up for questions? Nope.
Any questions for the panel? I know we're all in the after
lunch sleepy face. Anybody here work with pretty

(45:57):
small businesses? Few people.
Any questions for these panelists?
I guess the other thing we couldtalk about is the employee
ownership Trust. We had a meeting at lunchtime

(46:17):
about, yeah, we'll get to your question one second about how to
streamline the trust experience for business owners and make it,
like you guys are saying, simpler and easier and more
manageable. So more to come there.
Go ahead. That was actually going to be my
question, like if you can share how the experience was now

(46:38):
setting up the the trust. I don't know if you can walk us
a little bit about how it happened and you mentioned you
went to to to get some resourcesoutside of of the US, but I
think hearing the next about theexperience and a little bit of
granularity would be great. Yeah.
Thank you. So it was actually difficult,

(47:01):
like we knew we wanted to do a trust, but finding somebody to
help us that it didn't seem likethere's a lot of options.
And as we consider the options, initially, the idea of a
perpetual purpose trust wasn't on the table and it seemed just
things weren't going as smoothlyas we would like to have been
going. When we connected in with common
trust who had experience in putting in a perpetual trusts,

(47:26):
that was like light bulb going on as far as like, oh, wow.
Like this idea that there's purposes that can be preserved,
the idea that there's a stewardship committee that
that's their sole responsibility, the idea that
there's a trust enforcer that can protect to ensure that the
stewardship committee, if they go sideways, that they can make
them toe the line. It really felt like, which is

(47:47):
what we wanted in selling, was to really preserve that these
are great mechanic shops for these communities and for the
people that work here for forever, and we can protect that
inside of the trust. So that was super appealing.
The process was literally one ofgoing through somewhat of a
template and saying, here's somecommon things, but you need to
really think about what are yourpurposes.

(48:08):
And we can't tell you what thoseare you, those are what matter
most to you. And then it was an iterative
process of just going back and forth on what we think this
matters and then get really challenged on is that going to
last 100 years? Are you sure you want to be that
specific? Maybe you want to provide some
flexibility if things were to change.
So it was a back and forth process as we defined our

(48:30):
purposes and then put in place the various mechanisms for the
trust stewardship committee to operate successors of it, how
you elect to trust enforcer, howchange would occur if there's
grievances from employees, like just kind of going through those
steps and, and putting it in place.
And then the last step was getting the four ownership teams

(48:50):
because it's four separate businesses with four separate
ownership groups to all agree tobuy outs.
That was way harder than puttingthe trust in place.
So and then getting getting thatall written up and and done, it
took us about 6, nine months from start to finish from when
we started working on the trust and the we had the trust largely

(49:12):
in place within about 3 months. And then it took six months for
the attorneys to figure out how to write up agreements for buy
sells So. Hi everybody.
My my name is Hilary Abell, and I'm working at the US Department
of Labor heading up the Divisionof Employee Ownership, which for

(49:34):
now is just me, but our primary mandate under the Work Act, one
is to make grants. If we have grant funding, which
we don't right now, Congress hasto appropriate that.
But the other is to create a clearinghouse of resources on
employee ownership and employee participation.
And it encompasses all forms of employee ownership.

(49:54):
And I'm from my experience in the field, I'm of the belief
that information itself is essential and can be done better
or worse or made more or less accessible or helpful.
But of course, there's lots of other things that that go into
it. So it's not just about the
information, but I do have an opportunity for what we'll be
launching A clearinghouse at theUS Department of Labor with with

(50:16):
this purpose. So I'm just curious for you all
on the panel. And this, this stands for anyone
in the room, the folks at Rutgers and ask to know how to
reach me. If you'd like to have a
conversation later. What types of resources, what
types of information, what questions do you think would be
most important to ask on a federal government?
You know, DOL hosted Clearing House about employee ownership
and employee participation to help companies like yours and

(50:39):
others helping to move this agenda.
Anyone want to tackle that? I mean, I can like a few things.
So it it really felt lonely as we started talking about, well,
how do you train people on how to be an owner and there's
nothing there? How do you help teams be self

(51:03):
managed? Because it's not just about
dollars. If we just do the dollars, then
we're not going to really changelives.
So how do you help people adopt and share in decision making and
taking ownership of different aspects of how business works
and operates? And how do you operate board

(51:24):
successfully? There's just so many components
that you're feeling like you're navigating pretty solo,
especially if you want to grow and think about expansion of, of
what you're trying to do. Like even components of just
management principles in generaland having them accessible to
everyday employees to where theycan access it affordably.

(51:44):
There's lots of management training out there, but it's a
go to a course for a week and suddenly you're, you're not,
you're night at a manager and like you're not, you know
nothing, right? And, and yeah, and you want
everybody to learn management and leadership principles.
So how do you get curriculum onedesigned and accessible and
affordable for every employee toaccess on an ongoing basis as

(52:05):
opposed to going to a one time class?
Those are some other things thatI would be amazing if there was
good network support systems, resources, whether it's from the
government or from from anywhere, from industry, from
shared ownership groups, whatever, whatever, whatever,
any of those would be amazing. Yeah.
I, I think what we've seen is, you know, that there's a real

(52:26):
impact to the storytelling of itand helping, you know, business
owners connect with other business owners through their
stories as to why they transitioned their business.
And you know, for those businessowners who have gone through the
ESOP process and have delivered and other companies that are
100% ESOP own and there's no transaction debt, talking about
the real impact on the employee owners at the end of the day I

(52:49):
think is very important. And so making sure that those
stories are elevated, you know, coupled with, you know, the, you
know, some guidance as to kind of the technical needs, right?
I think it's really important. Again, you know, leading with
the complexity is not the best thing.
It's not a great pick up line. Like leading with the actual
impact that an ESOP can generatefor business.

(53:13):
I think is the the should be thegoal of of initiative like that.
And, you know, putting that storytelling out there, I think
is is critical because I think it's, it helps clear the air a
little bit at the end of the day.
I'll just pile on. I agree.
Business owners like to hear from other business owners who

(53:33):
took that same path. And so the state employee
ownership centers have videos ofbusinesses in our state that
you'd be welcome to use. What about you?
We'll send you a video. No, and this is our 10th year of
employee ownership and we did doa video having long tenured

(53:54):
truck drivers and folks like that.
And you know a lot of the truck drivers before coming here, I
did like pulled some of those guys and look to see like how
much are they contributing to four O 1K?
You know, what is their ESOP balance look like?
And it's real dollars. You know, we pay a very
competitive wage for whatever geographical area those drivers
are in and a lot of them don't contribute anything to their

(54:17):
four O 1K because they're using the dollars that they bring
home. So then when you look at that
ESOP account and you see, you know, $225,000 after nine years
of vesting, that's real dollars that they'll they'll be able to
grow for the next 10 to 12 yearsbefore they retire.
That will help them to be less reliable on Social Security

(54:40):
because we're not real sure. And, you know, potentially that
that dollar value will grow greatly in those 10 to 12 years.
So that's what we're talking about at the end of the day,
we're in it to create that wealth generation tool for those
individuals today. And then, you know, hopefully
that will go into, you know, their family's future.

(55:03):
Fantastic. Go ahead, Tim all.
Right, thank you. It's got it's a thorny 1, so
feel free to cut me off. One theme I've noticed emerging
not just in this panel, but in several of them has just been
that complexity of Esops in particular.
And we can't talk about that in front of business owners that

(55:25):
are considering it. But I think if we don't talk
about it here, we're doing ourselves a disservice.
So I'm curious of the three of you and the four of you actually
and clear you as well tangibly, where are there opportunities to
reduce complexity? And I asked this because my my
work of Co-op friends made the point we used to say when a
business is so big, it's a good fit for an ESOP.

(55:46):
Biggest employee owned company in the world is worker Co-op,
right? So I think that's kind of what I
want to see is also that smallercompanies can be Esops that it's
not like, oh, you're only a goodfit for a worker Co-op.
If you don't like that, you're not employee owned.
So how can we reduce the complexity such that more of
these forms are more apropos based on who wants to do what?

(56:08):
You got 60 seconds go. So I think part of it, it's
just, you know, playing the roleof trusted advisor and helping a
business owner walk through the path and mapping that out for
them. You know, it's something that
our team sort of talks about a lot and and we're unique, right?

(56:30):
I mean, we're, we're, we're, we have a Stevens only it's our law
firm, you know, 200 plus attorneys.
You are working on all aspects of, of a business's needs.
And then we also have an investment bank.
And so we're, we're with the client from beginning to end and
then after the fact. And I, I think part of the issue
is that, you know, the ESOP is avery unique corporate finance

(56:53):
tool and having an advisor set that appreciates the power of
that and what you need to navigate regulatorily to
leverage it. And then also help your, your
controllers, your CF OS understand how best to manage
the administrative burden of that is really important.

(57:14):
So that there's probably, you know, more work to be done in
the advisor set of really walking, you know, our clients
through the life cycle much morethan just, you know, having an
and CEO or ESOP association presentation of those.
Great. It's really spending the time to
map out like kind of what the discount, what does the calendar

(57:34):
look at look like, you know, andbeing that outside resource.
I, I think also when you have, you know, thinking of some of
the innovations in the space, when you think of like the folks
at SE Acquisition Capital who appreciate that complexity and
we're looking to go to market into make it for the business
owners a much more traditional ESOP exit.

(57:55):
But staying on being strategic advisors to those companies post
closing. As relates to the ESOP issues,
as relates to the dual mandate that an ESOP company's board of
directors has to be sustainable to pay down the payout
repurchase obligation to their employees, but also to grow
having, you know, the, the sort of advisor set, grow and expand

(58:18):
an innovation like that. I think it's going to be a
really important piece to the puzzle for the long term, to
scale and really grow employee ownership.