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Suggest questionIn this episode, we deal with a good overview of how important it is to keep our key people if we want to grow and strengthen the value of the business. Poor Edmund Dante’s - betrayed and put in the dungeon - retained against his will and that would inspire a whole novel/movie around vengeance. We want our retention strategies to leverage positive tools like the ESOP and SAR plans to compel the best folks you have to stay for the long-term - and better yet continue the great culture you have built in your company for the legacy of your business.
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<p><!--block-->[0:11] What's up this is these up guy everybody so happy to be able to join forces with you today and talk about esops. <br> Just a little bit more and today we're going to start off with this that I think will be intriguing. <br> <br> [0:28] I know you must hear this great deal. <br> I assure you I am innocent everyone must say that I know but I truly am innocent yes. <br> I know I really do know. <br> <br> [0:47] You mock me no my dear John Tess I know perfectly well that you are innocent why else would you be here. <br> <br> [0:59] If you were truly guilty there are 100 prisons in France where they would lock you away. <br> <br> [1:05] But Château dif is where they put the ones are ashamed of. <br> <br> [1:14] Let's have a look at your quarters tashjian no my dear Dante's. <br> You are going to be retained for a quite some time this of course comes from the movie The Count of Monte Cristo which of course is a movie built and based around a famous novel. <br> <br> [1:33] And one I actually loved the book the movies okay but the point here today is that. <br> Poor Edmond Dantes is going to be retained at the Chateau d'if. <br> And he's completely innocent and he should never have been guilty but I thought this would be a good thing to talk about are a good way to segue into a topic, of retention and how retention really works specifically with key employees the key people that you want to keep. <br> And so we're going to dig into that a little bit I do have multiple questions from people about the way that we're going to use an ESOP perhaps and, how do we how do we motivate people to stay in the company and how do we motivate them to be part of the long-term solution without having to do something like poor Edmond Dantes had. <br> Happened to him of course we can't do this thing's. <br> So so that's going to be the topic today we're going to actually get a lot more into the psyche appreciation rights programs as part of the key, incentives and really trying to make sure we've done some some information on that some your some seasons ago so I think it's time to we refreshing that up a little bit and talk through the way that those work. <br> <br> [2:49] So with that I wanted to kind of invite you if you're brand-new to the podcast to our website at journey to an ESOP.com. <br> There is a place there if you have a question or just a concern or something that you're thinking about we get those from time to time and we will be more than happy to respond and help you with some of the things that you're thinking about on your own journey to an ESOP. <br> If you've been hanging out with us for a little while thank you so much and you know we're excited just to keep doing what we're doing because I think it is it is making a difference we are seeing some major, you know connectivity between people in different parts of the country, and just this excitement of just being a connect not only you to the ESOP concept but also to other people in the ESOP community and really try to help fulfill whatever role we can in terms of your journey to an ESOP so thanks again for joining today. <br> So with that I wanted to stop in remember something from last year so this is the stats from last year's great resignation and this really freaks a lot of people out and it probably should because I don't think. <br> You know when we gone through these different changes of this is this you know the covid and then we had, the movement of PPP money into the economy and we had we have all this money coming in and then then the this population migration of different people and different you know States and so in 23 now we've got kind of dealt with a lot of the. <br> <br> [4:18] You know the repercussions of that I think they're still coming but you know mostly that had included of course the Fed, increasing interest rates and that's truly changing a lot of things maybe even the scope of what the forecast we're looking like has changed a little bit, but one of the things about last year was this great resignation in the stats from that are on average 4 million Americans were quitting their jobs each month in 2022. <br> So that's kind of crazy in month of August in 2022 4.2 million Americans quit their jobs the month, I was with the most American resignations was November of 2021 so that was before that with a whopping four point five million people quitting their jobs. <br> Throughout 20:21 an average of three point nine eight million workers left their jobs every single month so, over 47 million Americans had left their jobs by the end of 2021 so lot of things in 2021 or 2022 just kind of turned on its head and I think one of the things about this, episode is it awakened the country to the idea that people, that the culture that we're living in has changed where work culture and work, ethics in it in a sense of what it what does it mean to work for a company for so many years and then do something else that has changed radically in the last couple of years. <br> <br> [5:42] Now we'd all agree in business that it makes sense right to to have a strong group of people, in your employee Workforce that are retained, and that continued to to bring about a successful company without you know having to do all the things that you have to do when you bring a new people with, new training programs and, onboarding and then you have the whole inflation thing that too as well that coupled that were you had a lot more wage inflation happening so cost direct cost direct labor costs were really going up and up and up so. <br> <br> [6:19] Keeping all that in mind really important to be like as we as we think about that concept of the great resignation, when we think about that like Isa the ESOP itself coming as a this is an idea guys that if you haven't considered that can help, retaining people so some clearly making a connection here between the idea of retention of people and then using the ESOP now real quick as we think about that just because I don't want to spend too much time. <br> You know in that because I think there are some great benefits of being an ESOP company for the employees that will help you retain the employees. <br> But in end leads me to stop and say a couple of things obviously are that it's a benefit program that looks like a retirement plan, that the longer you stay the more value you're going to have so it's a long-term retirement plan for the basically for the entire population of full-time employees the rank and file, so that's and that's going to be a nice benefit that they're going to get in addition to that as you think about the employee-owned. <br> If messaged correctly there is a sense of if I can do this right if I can if I can show people what this really is a my my employee. <br> <br> [7:34] Counter that the employee census of individuals, if I can do that right and message it correctly then I can connect them to the idea of the value that can be created in an ESOP plan, for their main again for the retirement plan but the ability to grow the value much stronger than just having a 401k plan and so I think that's really part of the the. <br> <br> [8:00] The desire when somebody's thinking I'm going to sell my company to the employees. <br> And I think maybe more for not just for the owner who selling but also for those key people to is that we would build a retention program, around the Employee Stock ownership plan that really resonates with what people are wanting to do because we're making them a stakeholder. <br> Over a longer period of time and investing program a stakeholder in what matters in that is that its value the business grows then the value of their net worth is going to grow commensurately. <br> <br> [8:36] Now. <br> <br> [8:38] That's kind of the this drill brief summary of what I think an employee stock ownership plan does for the employee retention issue now we not only want to retain them but we also want to help them, be motivated now one of the things about succession planning when you think about. <br> Concepts related to the ESOP we are usually I'd say almost always thinking about the selling shareholders in some way. <br> <br> [9:08] Providing a succession management succession plan to to their key people. <br> Now in some cases that's that's way more along in the timeline so when we pick it up and we start working on, the actual ESOP in some ways that's already really been fully developed in some in some sense like we've managed to move, the responsibilities of running the day-to-day operation or even even managing the company from a maybe a CEO or president level those in some cases on the Spectrum have been, really matured succession plans and so that can come now and then the spectrum of all the way to the other side is like nothing's happened on management succession so, so as we think about this spectrum we're going to want to assess this in the journey to an ESOP at the very beginning. <br> <br> [9:55] And it's not to assess it to rule out the ESOP it's to assess it so that we can understand what are our goals and objectives when it comes to some of the things that the selling shareholders may want to accomplish in the ESOP transaction. <br> And that is they want to provide a way for them not to be completely responsible for or start getting out of the responsibility of managing and being so busy with the with the business, and so that's a big part of the motivation of maybe using an ESOP. <br> But for the key employees and these can vary from business to business because I've seen some companies where we're talking three people. <br> I see some companies when that list maybe goes down to like several tiers Tier 1 tier 2 tier 3, that could include maybe 10 to 12 people and maybe different value tears when we start thinking about the contribution so when we talk about key people. <br> Keep in mind that this can this could mean a lot of different different things for different companies. <br> Now Tunis a key person in a company is somebody that's going to. <br> <br> [11:04] Do more than just hey I'm going to show up and do my job I'm going to just show up and do hey let me see my job description for a second, you know they pull out their piece of paper and like oh yeah you know I'm not supposed to do that I'm sorry I'm I'm too you know my job description says I'm really only supposed to. <br> <br> [11:22] Do this and I'm not supposed to do that right that's not a key person, and that probably can frustrate people in some organizations when you hire somebody like that what I'm talking about is somebody that sees the need and fills the need, and there are key person because they they've got all kinds of skill sets that are going to help build value in the company they're willing to fully commit those skill sets to, to the ongoing needs of the company the future of the company they're willing to be in culturally a fit to the the company's core values. <br> Which I do believe that those need to be in a in any kind of organizational system you're going to want to spell those out I think those are super important, because with a company without core values and kind of digressing a little bit as I go into this but I think it's kind of a good point to stop and talk about a company without core values and we're working through succession planning. <br> <br> [12:18] The question mark that I always have is hey what is what are you hiring for when you see a somebody that has great talents and skills if they don't fit in your company's core values. <br> Then they're probably not going to be a good sustainable fit you're gonna have this mismatch, maybe keep team or a team full of controversy and dissension as opposed to you know maybe the team maybe as it works towards, the same goals with the same core values, they may not agree on everything but because they have the same core values they're working towards the same vision and working towards the same way to approach that Vision so documenting and thinking about your core values I think is a very key step. <br> EOS traction always deals with that at the front end there's a lot of other business books and programs on on this subject. <br> <br> [13:09] So I'm assuming that these key people have an alignment I'm assuming when they are the company has good core values and I'm assuming the key people have a strong alignment with those core values. <br> Those those key people are going to be the ones that in the future when we start thinking about leveraging this ESOP as an as an exit strategy for my. <br> Company owner selling shareholders to either move out quicker move out later they're going to be it's going to be important for them. <br> To be able to leverage that person in and get those people in the ranks. <br> So having said all that what's going to be so absolutely necessary. <br> <br> [13:53] For for the organization as it as it moves through it see some trees up transaction whether we do a partial ESOP or a hundred percent Nissan, it's going to be very important for there to be a motivated program or a retention program for the key people that will motivate them to not only be there. <br> To do an Excel in their position. <br> So so that's the groundwork and that's that's probably the very common ground work for most companies that I have dealt with over the last. <br> <br> [14:29] Thirty years of my career most companies that I've dealt with in Esau planning is going to be there there's got to be a key group of people that's a good that are going to step up. <br> In some cases we as I said on the Spectrum we don't even have them recognized I've had clients we're like we don't even know who they are yet. <br> They may be this person or that person or we may be hiring somebody. <br> <br> [14:51] So just still doesn't matter because what we're going to get into is this idea of building a strong management incentive plan that incorporates a couple things that are going to be very important. <br> I'd say his features to your management incentive plan that will functionally provide. <br> Strength to the ESOP and the employee-owned company and it will provide. <br> Help in providing it will provide help in building what I would say is the goal of a sustainable employee-owned company because we got to have these people. <br> And again the key person is somebody that, is not just willing to work you know on what they do but they're also going to probably put more hours in than normal right they're also going to commit not just not just their skills but they're probably going to commit their time. <br> And as a business owner we do that because we know we're going to get well first off we love what we do second off we feel like there's going to be a strong reward for us at the end of the day. <br> <br> [15:51] And we're willing to take that time and energy and put that in there so so keep people are going to need some type of very strong management incentive plan. <br> <br> [16:01] Now we're going to end up getting into SARS but I want to talk a little bit about this idea that there isn't one plan that fits every single company right so and when we do he's not planning I'm not just saying hey well you know your you've got three people and your plan and so, your key your key people and we're just going to give them all stars in let's move on. <br> We're going to ask some questions let's talk about some of the questions we could talk about at the front end to really just assess some things that I think are are important to identify. <br> The type of company that we might have could be a could be a good indicator like what kind of business is this in terms of of the profile of how the customers are built in the company is it a company that has a lot of, of repeatable recurring Revenue, that is really from a revenue standpoint it's very Diversified it's very immature there's a lot of predictability that Revenue. <br> <br> [17:02] And out of that what we're what we start identifying key people we can kind of see that the business itself isn't really needing, to have a lot of maybe sales people you know as part of the key people group that could be you know that could already been established and we don't really need that as well so so energy standing the value of the structure of the business itself, will help us to kind of make sure that we're talking about the right folks, the other things that we will assess are obviously the industry like it what type of Industry are you serving when it comes down to your type of customers and maybe like I would just use use contractors as an example. <br> A construction business with its key people. <br> That would be really strong at as they come up the ranks at maybe estimating and project management and then they start managing a team and then they start they start doing more. <br> Maybe Business Development aspects or relationship building with key customers they start doing budget planning or maybe getting more involved you know as they go up the ranks there's definitely a for a construction company there are going to be some things that are. <br> To those key people and in some cases those. <br> People that get to those ranks are going to be more motivated by a short-term goal. <br> <br> [18:27] Journey short-term reward when I sticks when I say short term we may end up being they may end up being more motivated by having a stronger steak and profits. <br> If the company has their profit targets and so getting cash every year out of that as opposed to, waiting in a in a stock appreciation rights program for this this Tsar to build value over this may be certain period of time let's just use a, a five-year period of time so in that light what we're thinking about is is what is really motivating when I think about who the key people are who are they, what really motivates them. <br> And if I if I say just say Well everybody's just going to get us our and I don't think about this then it may not be motivating to them at all and they're like hey I'm not going to wait for this many years I'm going to go ahead and take off so we have to think about that. <br> <br> [19:22] When we're structuring the management incentive plan and and there might be then as we start thinking about who they are a combination of things that, would motivate them to either stay there and also give them maybe a little bit so you can always use kind of like, hybrid of two different things working together but it needs to be we need to Target something that really move we'll move them move the dial. <br> Now we may also have a key person in the company maybe there's one. <br> And I see this happen relatively regularly honestly where you've got one person who never really got any equity. <br> And was big part of helping build you know maybe they thought they were more more or less valuable doesn't even matter but you know what they've done. <br> To help build value. <br> <br> [20:08] And so before we get too deep into the management set of plans and the czar's as we think about those one thing I would say is that it's possible, that you cut them in on a percentage of what you're actually going to sell and there's a lot of ways to do that from a tax perspective that might be something to explore with your transaction advisors and your CPA of course in your attorneys but the point is that there there might be a need then for you too, incentivize them first off by not D incentivizing them at the front end oh. <br> You know here it is hey by the way we sold the company to an ESOP thanks so much for all your years of service I'm kind of being sarcastic today so it just hopefully that doesn't bother you. <br> Hey we're kind of being, so so thankful to you for doing all this but hey you're going to be part of the ESOP so have a great day and the guys like look I'm 60 something years old and for the for me to benefit, in the ESOP I'm going to have to be here for another at least 10 years that means I'm seventy something when I when I leave, and still I'm not going to get as much as somebody who's now in their 30s or 40s so the periods, Brennan fed itself as a retirement plan doesn't really work for me right so that could be a d incentive iser for somebody at that level, and you really want them and we need them we start thinking about some of the elements of a sustainable employee-owned company. <br> <br> [21:37] As a selling shareholder we need them to stick around we need them to stick around because the bank the company now has has borrowed money to pay out the selling shareholder and so now there's this this debt obligation that the company has and and that that money could be borrowed from a bank and from the selling shareholders. <br> Providing financing and so you have this combination of debt. <br> Where the selling shareholders not even going to get paid until the bank gets paid and so the next five to ten years are really kind of critical. <br> <br> [22:10] So so let's let's go back to the beginning before we even build this and say how can we make this Fair a fair proposition for that person who's done all that. <br> <br> [22:20] So you know where I'm going with this and the ESOP planning is that I'm trying to make the case to that you need to get your ducks in a row when it comes to your key people, and you need to have that done before you get everybody in there to talk about your company like the trustee and, the valuation firm before you get a like the site visit or the put together the big presentation because you need that person or persons to understand what's happening, and they needed they need to buy off on on this innocence now they don't have to they're not you you can sell your shares and do the whole thing. <br> <br> [22:58] Good planning would mean I want to tie them into what we're doing and there's going to be this very, part I think a very optimal stage of including them in some cases I've seen it happen like the very beginning, where nothing has been really kind of built yet I've seen it happen at the stage where we get through all of the all of the valuation modeling all the feasibility modeling, we get all through the warrant and thus our modeling and it's like now it's time. <br> To really get those guys involved in it so you so you can kind of get their feedback and input so so in this whole category of thinking what we're doing is we're managing any potential D and Santa visors. <br> Before we jump into the incentivize errs if that makes sense. <br> <br> [23:47] Now what we're going to do now is think about okay now let's just say we got them on board, they totally get it they're excited about the possibilities in the future of what's happening now we're going to start to build out the idea behind the management incentive plan and so I, so I took it I took a few minutes and we talked about what that type of the company was what the core values are what your customer base is who these people are what their backgrounds are. <br> Some cases you may want to as you start thinking about this you may want to if you're if you're already a one shareholder and you have an existing board of directors or you have. <br> <br> [24:24] You know a couple shareholders you may want to rank some of these people never done that maybe rank them to figure out who in your in your mind has more value to the organization, so that you can think about this in a any possibly a tiered system there are cases where you know the one person has. <br> Some everybody has the same value and every there's parity to that whole key group that were like hey this everybody's got the same value let's just treat them all the same that's all like I said that's all fine I think you just have to think about that because ultimately. <br> If you f it all gets pulled off correctly everybody will agree this makes sense and we're we're good to go and we feel like we're being rewarded, for that and so so as we said as we said that that needs to be investigated in you need to work through your advisor I think to do that to really, build the case for how that's all going to be put together. <br> <br> [25:20] Once that's done then think about the options that you do have in existing let's just start with the existing options that are already being provided in some cases there's already a phantom Stock Program, there's already like a deferred comp plan there's some kind of things that you guys have done and so those need to be transitioned into the new Management's and a plan so they're going to be this. <br> <br> [25:42] Like just say you have a phantom stock plan that that's going to be triggered with a change of control. <br> That needs to be worked out with them first right so we don't just throw something on top of what they already have. <br> Or they can be transitioned into some of these other types of things and so we're going to particularly deal with what I think is the most popular way, to motivate people that's the stock appreciation rights program to again to incentivize the key individuals to stay. <br> And to incentivize them to perform. <br> Now there's really two features in a stock appreciation rights program when it comes to an ESOP there is a retention and a performance aspect of it in a typical negotiations with the trustee, we are going to negotiate, the performance percentage and the the retention percentage and with their attention being the smallest part of the percentage and they're in their performance being the largest part so what's happening in this stock appreciation rights program. <br> <br> [26:42] Is that the in the key employee is going to be given a certain number of shares that will be, vested over a period of time and I mentioned I'll just use five years as a good example so in the next five years to the day from the time that the. <br> <br> [26:59] The grant Agreements are going to be given to or, made available to the key employee what's going to happen is that the employee is going to. <br> The key employees going to sign off on the grant agreement most of the time there's an employment agreement there that says hey we. <br> We're giving you this long-term benefit that you are really not doing anything but except doing what you're doing before. <br> And we want to have a non-compete and an in a non-solicitation agreement so we're going to either take your existing employment agreement maybe make it stronger. <br> Or in cases that there is none we're going to definitely look at the the Tsar would be a, in reply in the sorrow would be of the mill made available to them and in exchange for that we're going to get some type of protection over them, be able to leave and do something like that so that's going to be a kind of a normal, part of building a sar plan now what happens is those SARS are going to be in in a sense number of what we call synthetic shares which means they're not in synthetic Equity it's not real equity. <br> <br> [28:11] It's Equity that will match the value of the business and will dilute the value of the ESOP shares that were that we had already sold or had sold in the transaction itself, now because the SAR Shares are going to dilute the value of those ESOP shares. <br> Just like the warrants they're going to have to be negotiated with the trustee at the time of the transaction. <br> <br> [28:36] Now when you're doing SAR planning you're doing is you're going to go back to that list that I just talked about, and you're going to want to name out like all the key people and have some conversations with your advisor to go through how much those Stars might be worth in the future. <br> So that you can estimate for the company now, in this regard one of the things that's interesting is out planning is is you really as the selling shareholder you're putting your company hat on and you're planning the financial aspects of how your company is going to manage not only the debt obligation of the transaction but also the potential, liability of these Stars so so model needs to be created you need to work through that that conversation and then. <br> You're going to get some idea the nice thing about SAR planning is you just kind of scenario out this thing and see with who you have and plan that out and this is going to happen before you negotiate so you have some idea of what you're going to be asking for. <br> Knowing that a good adviser is going to have some sense of what's the maximum dilution the trustees going to allow on your negotiation, now when I do this I usually ask for more than we need because we don't necessarily need to issue all of this our shares. <br> <br> [29:50] And in the event that we're business our business is growing or we have potential to hire somebody else and we want to make some tsar's available a grant agreement available to a new member of the the key management team, then it gives us some options as we start thinking about it so it happens in this our planning is that we figure out like who they are. <br> What is what it's going to be in terms of the number of shares how do they fit if they are in a tier system, and then the nice thing about it is when we build it what we're going to do is also in the greement we're going to put in a vesting requirement so there's going to be a couple different requirements that are going to help protect the company. <br> And it's going to help protect the selling shareholders as well and the first is the vesting requirement which says basically if if you are here you're going to invest in these number of shares each year so part of that is going to be vested based on the percentage, of how much we had negotiated for just being purely a retention star. <br> And then the other piece of vesting is going to be how much the percentage so so let's just say we did up twenty percent retention tsar and an 80% performance are so in that very first year, if the company met its ibadah requirements now typically in a negotiation with the trustee we're going to negotiate the performance part of the SAR to include, Annie but a Target it could be some other targets but let's just use ibadah now for our thought our conversation so. <br> <br> [31:15] If the company hits the ibadah targets usually At the trustees going to want more than 100%, of the target so maybe they go with that 101 101 or 102 3% of the of the Target in that first vet the year that employee has vested in say one fifth of the total SARS available over the next five years. <br> And then each year is the same thing you just look at each year and at the end of those five years they will have vested in some level of those sorry shares it could be a hundred percent of those are shares and at that point in time the company then would be obligated to, pay out those are shares and, then if the company is the key person is going to continue on then there's an opportunity then to reload those SAR shares for maybe another five years and so so that's kind of the mechanics behind it in the and really the planning behind it which is, how much wood would it be would there be to really motivate, and invest in now on the on the key employee side what they're going to have is they have the. <br> Hopefully the visual opt you know opportunity of hey if we grow in value before beyond what we are even predicting. <br> Then there they can see that there's there's an incredible opportunity to participate in the value creation or the increase in value. <br> <br> [32:34] So one of the things I think is really important step is once you build those models and you really fine-tune what you think it's going to look like is either review some kind of level of the model with them at some level. <br> Maybe it's confidential information on the on the actual evaluation but maybe you're just reviewing the potential for those are shares and the amount of potential appreciation of those are shares. <br> Secondly when you do that one of the couple things I like to point out one or a couple of things I guess is that. <br> <br> [33:06] If the company just when you think about this from a valuation of an appreciation of value standpoint if the company really just keeps paying down the debt that's been created for the ESOP transaction. <br> <br> [33:17] On a dollar-for-dollar basis what's happening is there's an increase in equity value in the business for each of those periods so if we just hold constant like let's just say the cash flow stays you know on target. <br> And we just stay constant with that right. <br> We're still going to have a potential that the companies managing their debt correctly or or they're just accumulating excess cash. <br> That the company's Value stock value is going to appreciate just based on those two variables so I think for employees its key employees it's really helpful for them to understand how the value. <br> Going to have to go up or appreciate over each of these next five years and and so if they can understand that part of it. <br> And they can understand the long-term benefit I think that that the incentive itself can be a very successful tool. <br> <br> [34:09] To really Leverage The retention of that key person and and then build a motivation around that. <br> <br> [34:19] Outside of all of that that key person probably is going to get paid more than the other people anyways so even there the employee is going to get, a larger allocation of ESOP shares because of the way the allocations of ESOP shares go is that the typically this is typical the employee that, the compensation structure is going to manage the allocation of those shares to the employees so they're going to get that piece then they're going to get the Tsar piece and then as you round it all out I think you got to keep asking the question on an annual basis with the The increased responsibilities. <br> Are they satisfactorily market-wise to compensated so maybe their base pay needs to come up or maybe their bonus opportunities may need to come. <br> And so this is going to be a little circular to and you start thinking about it which what I mean by that is we may have to go do all that and then come back and say oh I just had a. <br> You know an idea we need to really do something on their normal comp we may have to go all the way back to the valuation model and input that into the forecast, so that we can we'll adjust the forecast for more comp dollars for, the company that could in could reduce the evaluation as well so so those things are going to be very important that's why I like to do models when I do this work is it's helpful. <br> <br> [35:37] To continue to update those and play those things out and you can't honestly this is probably one of the most important aspects of any. <br> ESOP company that has a real need for high-level key people to keep the company going. <br> Now this is going to have value as you as you do this kind of lay out some of these conclusion concluding points this is going to have value to a couple of people that are going to be important and these up transaction the first is the selling shareholder. <br> <br> [36:06] Because if we do this right then the risk of the selling shareholder note. <br> That's going to be there is going to be mitigated in reduced because this the key people are they're they're motivated and they're and they're working so they're they're going to have value out of the Starbase to based on that. <br> And they're going to be willing to because what happens is the tsar's going to be paid out. <br> That could affect you know I'm that's going to affect the company's cash and the overall evaluation which could affect the individual selling shareholders. <br> But it's still going to have value to them. <br> The second person is going to have value to before we even get to the final people is the trustee and the trustee as the buyer is going to like us are there going to be like yes we, we like this SAR so they're going to have they're going to like it because they as the buyer want to make sure that they got the key people involved. <br> When the company goes through its process of really explaining, who what they do and how they do it there's going to be some value there for them to say alright we see that the key people this is going to motivate the key people, this is going to be a question they're going to ask you know in the dialogue and the present site prep site visit presentation so the trustees going to like it. <br> <br> [37:23] The, finally then we think about the well actually not finally the other the other entity that's going to like it is if there is Bank financing I think the bank is going to like it because the, the bank is going to see that there are reasons for these key people to stick around and believe me underwriting 101 is understand your management team, understand the potential for that management team to disappear on you, that could be you know difficult and so that helps to mitigate their risk as well so you can kind of see that everybody is starting to really like this now finally the key person is going to like it because they're going to get more than just the ESOP shares. <br> <br> [38:01] The it's a short enough Horizon where they can build some strong value and they're going to be rewarded for working. <br> Really hard on this whole thing so so just to kind of close it out there's definitely some reasons why and there's ways to of course retain and motivate and incentivize people the, that are going to be much more positive than than poor Edmond Dantes then The Count of Monte Cristo so, anyway I hope you enjoyed listening today and we appreciate you listening Tech check out our website at journey to an ESOP.com if you, I have a friend and you're like hey I like that guy or that. <br> That lady and if you think that could be you know this could be helpful to them shoot him a podcast episode and see if that might be helpful if they're thinking about doing an ESOP. <br> So thank you guys so much for listening and we will see you on our next step on this journey to an ESOP. </p>
About Journey to an ESOP & Beyond
ESOPs are gaining traction. In the "Journey to an ESOP & Beyond” podcast, Phillip Hayes explains the process of the ESOP transaction and addresses ESOPs from a business owner’s perspective. The "ESOP Guy" illuminates the simplicity of ESOPs as he debunks common misconceptions that ESOPs are immensely costly and complicated.
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