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Suggest questionDoes anyone understand what is going on in the Tenet movie…it moves forwards and backwards. I think sometimes ESOP can be the same. This episode breaks down with clarity the conceptual factors of deciding to do an ESOP and real questions that others have asked to determine if an ESOP right for them.
Transcript provided by the publisher.
<p><!--block-->[0:54] Okay I can't do it anymore this is okay welcome to the ESOP guy alright so this whole scene is the reverse fight in the movie called tenant.<br> And I wanted it I literally live I was watching this movie and I was thinking this is,<br> the most confusing movie of all time and I'm going to just say it right now if you guys if you get this movie if you get if you understand like the way this whole thing works because I just don't it's so confusing<br> this whole scene right here is a reverse fight scene where everything's happening backwards.<br> <br> [1:34] And this is a Christopher Nolan film and what what I wanted to start off with this this by using tenant for this episode is I want to illustrate that that I know that sometimes,<br> Aesop's can be very confusing and this episode is going to be focused on.<br> <br> [1:57] To talk through like what I'm seeing a lot right now are a lot of conversations with a lot of different people all over the place.<br> <br> [2:04] Because of the ESOP so thank you guys for listening and thank you for telling your friends because it's very interesting you know because I'm seeing a lot of different questions from different people.<br> And mostly what I want to focus on today is what I would say is the conceptual phase of deciding to go forward on an ESOP.<br> And I'm using the movie tenant because I think it's just very appropriate that it's something so confusing as you.<br> Roll it backwards and you go forward so you start realizing oh I can actually start understanding what's happening now but you do have to watch the realities you got to watch the whole movie and tenant and I think you're going to have to watch it,<br> a couple times because it is very very confusing.<br> The goal of this podcast is to because it's called the journey to any top it's really to help.<br> <br> [2:58] Unravel the mystery of an ESOP and really help people to understand what it really is how it really works and.<br> <br> [3:06] There's a lot of resources that are available to help you do that and hopefully this is something that you as you listen to it really will help you,<br> to under better understand what an ESOP is so that it can become a viable alternative when you're doing your own planning the conceptual ESOP when we think about this this episode really is for those that are maybe not embarking,<br> on the ESOP yet but it could be that you're in it and you can go back and really think about what the decisions you are making and how you made those because I think.<br> The going back and forth on conversations which I'm going to get into some of the things that I've discussed with different people that I think might be helpful to you.<br> So as always thank you again for listening we are we're in season 4 this is our fourth season so<br> who were in the new year it's been exciting for in 2022 now jumping into 2023 so if you are<br> liking this podcast then please share it with a friend if you have an interest in other episodes and you don't know about it our website is journey to an ESOP.com.<br> And you can go in and download any episode you want to listen to by topic or by interview,<br> and so with all of that again thank you so much for tuning in today as ice will even know it's true nature is to lose this is knowledge divided.<br> <br> [4:34] All I have for you is a gesture of combination with a word tenant use it carefully.<br> <br> [4:45] He'll open the right doors with some of the wrong ones to that's all they told you that test you passed.<br> <br> [4:55] Not everybody does.<br> This is just like Aesop's okay so as we stop as we get into this movie a little bit and we start getting into the concept of what I want to get into is.<br> What I have for you is this gesture it's called tenant you know how confusing ever talk to somebody about Aesop's and you're just like I don't know what,<br> dude or whoever you are I don't even know what you're talking about right,<br> and so I really want to stress the importance of in this is one of the reasons I'm doing this episode kind of so early in the season of really asking a lot of questions and surrounding yourself as best you can,<br> with people,<br> that makes sense because I don't know what he's talking about this this whole gesture thing and this one scene in the tenant the movie tenant as I jump into this real quick,<br> is we think about.<br> <br> [5:49] The what it was what's going on is it was so confusing and I know like my kids like seem to get it really easily but.<br> What I wanted to kind of say is that it is this inversion of reality in a sense like this reverse reality and it's,<br> it's a what is it about it's about time travel it's about time manipulation it's about jumping forward the characters able to do something more like rewind and fast forward through time.<br> This this is like what inversion and just this whole thing is kind of like it jumps all over the place and what I'm trying to draw in the parallel here is that esops are kind of like that and just become so,<br> sometimes all over the place and there's if you break it all down.<br> Into its components I think that's what you have to do with the movie and version to really understand what's happening this Seeker,<br> secret agent the CIA agent is the protagonist and he is basically working towards,<br> solving the mystery of the the crime and he has to go through this whole process of doing that and.<br> <br> [7:07] You know going into it they it's just like you just have to kind of like take it piece by piece to and break it all down to is to make it make sense and that's what I'm getting at when I talk about the conceptual side of Aesop's and so,<br> going into this I wanted to kind of start off with some of the general conceptual things that get discussed a lot and I.<br> Kind of mention I had been speaking to a lot of different people about some of these things that seem to be very similar and so hopefully this would be super helpful for you as you start thinking about,<br> what your questions are for your company's going towards an ESOP and whether that be I guess the first thing is whether I can do a partial.<br> <br> [7:50] ESOP or 100% ESOP which means sometimes people just want to sell a portion of the company.<br> And other times they want to sell a hundred percent of the company.<br> Now make it making it more maybe more complicated there up the other opportunities you just contribute some stock to the company and do like a non leveraged ESOP so you could do very very small,<br> what I could set what I would say is very small partially stop where you're just contributing and you're starting the process of becoming an employee stock ownership.<br> <br> [8:21] Plan your starting that to become an employee-owned company,<br> with the in the end game in mind as I'm going to start building this this process in phases and so in some cases that non leverage very small ESOP,<br> percentage going in will be helpful we get to deduct the contribution from the ordinary income tax so that's kind of cool and then going.<br> Next would be like yeah now we have a plan to work our way into maybe even from an expense standpoint,<br> a more expensive type of transaction where we actually have a really leveraged transaction and we have in that case,<br> we have to hire a trustee and evaluation firm button on leveraged ESOP would be a good place to start conceptually to be even even to understand it now,<br> the other side of that is this idea of a pre-funded ESOP we actually set up the plan you're not moving any stock in it but you're just putting cash in it and you're using that cash as a deduction against your taxes and so there,<br> you know before you even get into the this,<br> spectrum of opportunities within the ESOP which would be all the way up to 100% sale,<br> and then bring ourselves back to a partial sale leveraged ESOP bring ourselves back to a non leverage ESOP contribution of the stock and then bring ourselves back before that and just do a pre-funded.<br> <br> [9:41] ESOP and we're going to take the deduction so so first off is like what conceptually makes sense for us to do that and again,<br> what I want to stress is it's not this is not that complicated and there is definitely a process,<br> to evaluate this even before you get into like working with somebody on feasibility,<br> you need to find somebody that you can work with to add the answer these questions to see what those types of options are now you might as we talk about the the partials<br> non leverage and you might want to do some analysis preliminary early on the like for instance what would the companies<br> overall valuation model produced in terms of the total valuation of the company that might be helpful information,<br> in tandem with a very solid conceptual conversation on those types of topics so,<br> the next thing is conceptually that I think you need to be kind of gearing up for is.<br> The understanding of how you get your money so you need to understand the funding aspects of what an ESOP looks like and so I've talked to a couple people,<br> about,<br> the the reality of that that the company itself it's the cash flow of the company that's where your money is going to come from ultimately which is kind of strange when you when you back up on this a little bit.<br> <br> [11:07] Can in Oregon we're just dealing with questions and answers that people have,<br> when you back up a little bit you're like well it if I just keep the company I mean this is a the obvious thing right if I just keep the company I'm going to get the cash flow.<br> Well yeah that is true if you don't do an ESOP you just keep the company you're going to keep the cash flow.<br> <br> [11:27] So why are people selling their stock went to an ESOP when the when their cash is coming back to them through the form of of,<br> the company borrowing money from Bank financing and getting the money from seller financing which ultimately gets funded by the company's cash flow why are they still doing it well they're ready to first off they're ready to sell the stock that they have in the company whether that be in part,<br> or in whole,<br> because their risk they're ready to move on from having the risk of the business and transitioning that over to the actual company,<br> so that's one reason people are like well I'm okay using the cash flow of the company to pay myself out now,<br> because of the there's that because of the tax benefits to as depending on whether you're a C corporation or an S corporation or going to be a sea or an S we.<br> If we're a c-corporation we can use the benefit of doing a 10:42 and so conceptually I can actually,<br> not just sell my stock I can defer the capital gains on that stock and sometimes permanently defer that or eliminate the capital gains,<br> so that I don't have to pay that 20% of taxes when I do sell my stock so I'm getting my.<br> Equivalent value fair market value of my stock out of the business whether that again be in part or in whole.<br> <br> [12:50] Without the burden of being tax now that that's one of the promises of being an ESOP is that you get the benefit of doing that,<br> where you don't have that in any other place something that came up recently in conversation with somebody owes hey what's the difference between an ESOP,<br> and employee ownership trust now I'm going to tell you the promises I've got an e on E OT.<br> <br> [13:19] Podcast coming and it's not ready but the I'm going to do one to really explain the difference between an ESOP and employee ownership.<br> Because there might be some companies that hey look at that as a better opportunity and,<br> in their conceptual phase the were what we're going to do is we're going to bounce these things back and forth and say Hey you can do this here you can do that there but the reality is when I get to as I started talking about.<br> <br> [13:47] The 1040 to capital gains deferral that's only available for a nice.<br> So if I do something else like neot I don't get that benefit period right so there's no it's black and white there are no there are literally are no tax benefits on the eot by the way.<br> That not should not that they know not that you shouldn't do it then it's just that part of conceptualizing what makes sense and what doesn't and so.<br> <br> [14:14] On the other side of the coin is this idea that well from a can sell why would I sell my stock and use the cash flow my company to pay myself back well I now I've transferred the.<br> And if I stay if I'm an ass and they stay in ass.<br> Then the S corporation is as an exempt entity and so whether that be in part or in a hole that means b a time that my entity my company is no longer paying.<br> Income taxes so now my cash flow.<br> Is instead of being what was happening before is my cash flow as an escort was was coming through to me as a shareholder on a K1.<br> <br> [14:55] And now when I sell that over to the ESOP it goes through the ESOP as a K1 no longer burdened by taxes and freeing up something like 30%,<br> in new cash that comes back to me through the the debt payments of the company so,<br> what that does why I would do it is because I get the risk off and I have a cash flow stream paying me out,<br> that is enhanced by a subsidy from the Internal Revenue Service because they're no longer having to pay taxes so clearly one of the conceptual sides of this is why would I do that well,<br> why would I use my own cash flow to pay me because I'm going to get the risk transferred from myself to the entity and I'm going to get the,<br> the equivalent value of what that cash flow is worth.<br> At least at fair market value not at least but at fair market value so that that is a,<br> an attractive thing to some people that are ready now some people conceptually look I'm back to the partial versus 100 I'm not ready to sell on my equity.<br> Now this is something that's come up to it's like hey I also have kids in my company you know and they and they they do have this.<br> <br> [16:11] Intention to be part of the company in a long-term basis like so my first question at that comes up conceptually just with people right is like.<br> Forget these up for a second guys let's just take a deep breath here I'm my goal here I know I'm the theesopguy and I want to help people become Aesop's but my goal isn't to.<br> <br> [16:31] Persuade you to be a nice.<br> If you have kids in the company that are motivated to buy the company from you or you feel inclined.<br> To give them the stock through gift and estate planning.<br> <br> [16:46] There's nothing wrong with that that's been going on for forever right family businesses transitioning to the Next Generation I love that I think that's that's a beautiful,<br> thing where they fed the father and they're in the mother at the kids can bring their kids into the business I did a podcast last.<br> Fall with one of my clients who was she took over the business from her her mom and dad and then she did 100% Isa,<br> her kids frankly weren't in it but if your kids are in the business there's nothing wrong with them taking over so my first.<br> Question is or my first answer to that is is pursue whether or not that even makes sense now what's on the table conceptually for.<br> <br> [17:28] Family businesses is hey what if if you do like the ESOP concept and we just maybe you're thinking about it from Ike I love that tax benefits of an ESOP I love the idea that I could do it,<br> capital gains tax deferral or I love that my part of my company could be could be tax-free consider having the kids own some equity.<br> <br> [17:50] Private part of it you know just doing a partial ESOP so they keep some percentage of the company,<br> in your transition plan and the remaining part part maybe goes to these outfit maybe that's a controlling interest in these up or maybe it's a non-controlling interest,<br> and then the conceptual side comes back to in those types of conversations as well well then what is governance look like who's going to be in control of this and and that coal thing spins into some conversation which.<br> Frankly I love because they the reality is,<br> the ESOP employee-owned process when we think about the reality of it all playing out depending on whether it's controlling interest being more than 51 percent of the sale the ESOP owns more than that or.<br> You have a smudge or minority ESOP that owns a majority minority ownership percentage there's going to be this like who's in control the company now ultimately,<br> to answer that question the control of the controlling interest of the company is going to be built around the decisions that the company is going to be made.<br> To make in the company's behalf is the board of directors if we have a minority ownership Esau.<br> Then the board is going to be basically whoever's going to need to be on that board they can all be internal members of the ESOP the.<br> <br> [19:12] If it's a controlling interest we're going to need to have at least one independent board member so from a board of director governance that's going to be the way it's going to be so there's,<br> there might be some fear when it comes to all I have to have an independent board member,<br> and so when those kind of questions come up I think you need to explore this a little bit deeper but I will just kind of like for I would just summarize it by this.<br> The independent board member is somebody that you will choose and the trustee will approve.<br> And the trustee because the trustee is not there to manage the company they just want to make sure that they're independent part of the board,<br> that means that they are no there's no family relationship where they're biased there's no<br> business relationship where they're getting paid something by the company prior to at least prior twelve months prior to their not an internal employee so once you hit the independence requirements it's like then.<br> There's a lot of opportunity to bring in a board member independent board member that will round out the board and so my practical experience with that is that there isn't really a significant loss of control.<br> <br> [20:27] See let me let me say it this way the trustees buying the company on behalf of the ESOP they,<br> and there's a negotiated value that gets happen that happens right they already at that point of time right.<br> <br> [20:41] They know the company they believe in the company they've seen the value of the business<br> being created by these people they're not there to take that whole thing and up and up turn it because they want to rep you know Flex their muscles as trustee<br> they're not there to do that they're there to make sure that the ESOP plan is governed the according to the plan,<br> and that the board is just doing what it's supposed to do so there's really this whole idea of control and love to go into that 44,<br> an hour and really get into the nitty-gritty of that with examples but the bottom line with that is that I think,<br> whether you doing a control or non control there's still a significant amount of influence the board of directors has I mean primarily they have the influence now.<br> Then you go into like the day-to-day management of the company that is not going to change.<br> So so really is the option of having a partial ESOP.<br> Conceptually when you have either a family member that you want to be part of the company and own a piece of this or I've had it where you had a,<br> key person needing to own Equity you can do this hybrid and it can be extremely successful and the in your process of building up.<br> What you need for the ESOP So conceptually speaking.<br> <br> [22:00] I think that that just makes sense and again just to break it down into its pieces that's going to be something that I see come up all the time.<br> <br> [22:11] Now one of the other things that's come up frequently this was in the fall and seeing that too just recently is hey I've got this company I want to do the ESOP but we're also looking at.<br> Buying somebody buying another company in the middle of doing our transaction or you know prior to doing the transaction.<br> How does that work conceptually how do I how do we do this in still keep you know keep doing what we're doing and so in this in this scenario.<br> The like the company is.<br> They're in a growth plan and they're constantly looking for opportunities to acquire and again just to make it simple it's not going to hurt your he's up for the most part.<br> Now what we have to do it we got it we're going to have to move from conceptual into dealing with the numbers right so.<br> And it really kind of matters in this sand in this scenario if we're going to do an acquisition.<br> <br> [23:10] How close you are in the acquisition are we right at the moment of doing it and then how does that integrate itself into the business if that's the case then I'm going to want to build that into the forecast and the cash flow,<br> and I want to make sure that we have looked at all of the first off the financial part of the of the deal and making sure that those.<br> <br> [23:32] Um the cash inflow and the cash outflows are correctly represented what's happening into the balance sheet how does that,<br> things like 40 9p with the new employee base what types of compensation or being given whether it be deferred comp,<br> and just just a lot of the little parts and pieces those need to be if we're that close to doing it and we're going to do an ESOP right away then I think it's,<br> absolutely imperative that you include that into the cash flow planning the other sides of it though I mean this could be some,<br> a nice Bowie of new revenue and new cash flow that could actually support a higher valuation now,<br> there is a little more risk when you're doing an acquisition if you've never done one before for instance if you've never integrated a new business into your into your company there's,<br> if there's a new geography if there's new in the whole new business line that you aren't familiar with so there's a lot of those types of things that will,<br> that I would say from a conceptual side and also from a business planning site need to be dealt with from a specific company risk standpoint.<br> <br> [24:44] Their agreement the legal agreements obviously are going to be important the way that the deal is structured so what is the potential liability most acquisition deals in the Middle Market space for.<br> Companies are going to be more of an asset purchase which just means that we as the business owner are not going to buy the stock if we're going to buy the stock of a business then we have to really think about,<br> what liabilities are coming over that are contingent into the company what sort of,<br> indemnification is protect us and so so there's a little bit of a legal part of it that needs to be understood and then relate into it so so that's if you have an acquisition that's going to happen like real timely be right before my,<br> ESOP transaction which honestly could be a lot right if you're going to do both in one year that could be a lot for everybody to be.<br> By pursuing an acquisition and an ESOP but just some throwing it out as a conceptual discussion because it's come up in conversations now,<br> let's just say that that instead of that we're talking about moving into like well do the ESOP and then we'll do an acquisition you know maybe at the end of the year,<br> that's different I mean now we've got okay so that could work,<br> without really having to do a lot of analysis we just need to know does it make sense you know and one thing one thing that's true about Acquisitions and mergers they you know some of those deals work and some of them don't.<br> <br> [26:12] You know and part of its maybe your history of your company how many of you actually done and pulled off.<br> But they blow up quick right there's a cold feet sometimes with the with the seller so who knows but but I do think that that's an interesting conceptual thing to talk about.<br> Does it limit us or even does it limit us after we become the ESOP and now we have this employee-owned company does the the company.<br> There's a trustee come in and say hey you can't do Acquisitions or you can't do this you can't do that and the and the answer to that snow the board of directors.<br> Would go in and make sure that the company if they have a organic growth plan which is means we're going to keep doing we're doing we're going to add sales people we're going to grow the business that way or they could have the board of directors could say strategic our strategic plan is to do some organic growth.<br> And some growth by acquisition and so that could be super healthy.<br> And really really helpful for the company and so the key is understanding that there's going to be things that the company is going to continue to do whether it be an acquisition.<br> Having to buy equipment having to build out a new facility expand geographically or hire some key Talent you know.<br> <br> [27:28] By and Implement some some crazy new software that's important for the there's going to be a million things the board of directors is going to manage that and so esops,<br> don't impede that urn they don't impair the ability for the company to continue to do the things we're going to do to grow.<br> <br> [27:44] In fact sometimes I think that they they.<br> <br> [27:48] Provide a better place or better platform for those types of things because you have a formal board of directors in you're going to have more formal processes for the company to do certain things like that that are going to be super healthy for a sustainable,<br> ESOP company,<br> now that word I wanted to use that purpose to the word sustainable because when you start thinking about conceptualizing your Esau I want you to connect to the idea that we don't.<br> You know this is not a transaction by itself in and of itself this is a.<br> <br> [28:24] Transition rights not transaction it's a transition we're transitioning the ownership of stock from seller selling shareholder to.<br> The trust which then as an ESOP gets.<br> Released as shares to the employees over this period of time that we have again conceptually over the period of time that it is is the what we call the inside know so it's all being released over this.<br> Formulaic time period to the employees based on primarily compensation but also could be a point system of Merit of how they actually are going to get the shares.<br> So when we think about all that being a transition a couple things I want to say is.<br> We have to begin with the end in mind we have to begin with when we're talking conceptualizing.<br> Theesopguy of the sustainability of this company and how it's going to go on into the future.<br> And when I'm talking to somebody about an ESOP.<br> <br> [29:28] Most of the time the people that I'm talking to are not focused so heavily on just the transaction.<br> Now what happens is is we start talking about some people I do talk to for instance are so focused on like this idea of I'm coming out of this is what I'm going to get it I'm going to walk away with this much money,<br> I'm going to when they start talking about I'm gonna get this multiple and I'm going to have this and this and this and they get into really hyper focused exit planning.<br> <br> [30:00] I'm like a little bit I'm just going to say it like a mic let's pull back a second and really evaluate do we want to be even become an employee-owned company because the Exit Plan itself.<br> Is really one of the things that we're dealing with in an ESOP plan but it's not the only thing that we're dealing with we are dealing with the Exit Plan being facilitated by this transition of.<br> Privately held company to an employee-owned company with.<br> The benefit of doing some Bank financing and with the benefit of doing some seller financing with the benefit of the owner getting interest on their seller note and potentially a warrant on that Cellar note if that's what they choose.<br> <br> [30:46] With the benefit of the key employees becoming much more.<br> In a phased in succession plan much more part of it as a transitional process of being more of the key decision makers,<br> and so we're seeing all those kind of like this smooth transition from what we were to what we're going to and all the tools of these,<br> are going to start to be kind of put into place like the key managers getting a stock appreciation rights,<br> agreement as part of their deal in addition to getting ESOP shares and then having this transitional like this is the cash flow it's going to look like so,<br> one of the conceptual sizes what am I going to look like in going forward what I have to be concerned with is is what's happening in my from a sustainability standpoint and how am I building that into my decision to go forward on a Nissan.<br> <br> [31:42] And so<br> that could as we as we get into it could save you a lot of money before you even get like to hire all these people to ask questions about esops is do you really want this business transition in do you really care about,<br> the process of going through that with your people,<br> and if the answer is no I don't really care about that I've had like clients come back to well I'm just need to I'm so done I don't want to work anymore I'm so tired of this I just want to get out.<br> <br> [32:10] And I'll take a deep breath and be like alright okay listen.<br> <br> [32:15] Let me say this to you I don't know I don't know if any stops right for you you know.<br> And I say that kind of like okay I'm not trying to talk you out of it I'm just trying to like say to you it's not your this is not really intended to just be an Exit Plan.<br> So I think that's important I love the word legacy it gets used a lot in our industry.<br> <br> [32:39] When we think about Legacy a lot of things come to mind right on its cover I like.<br> Yeah I totally get it I am a founder of a not science I am I'm but the I'm the client I'm the founder of this company and my names on it.<br> And I want that to be going on into the future that's kind of one aspect of Legacy I want the name of the business to be.<br> Joe schmoes whatever.<br> And forever and ever it's going to be Joe schmo's company bubble and that's cool that's Legacy but deeper than that what I think Legacy really is this continuation of the opportunity for people.<br> That have worked really hard alongside the owner.<br> <br> [33:25] And then the opportunity of the new people that come in at work really hard alongside the employee-owned people.<br> <br> [33:33] To build a transitional sustainable company that's vibrant and strong going into the future.<br> <br> [33:42] And one of the things I love about the idea of legacy and what really excites me about being involved with ESOP companies is that I fundamentally believe.<br> That smaller businesses Middle Market businesses.<br> Are way way better and this is my podcast I can be super opinionated are way better than big Corporate America companies.<br> And I'm going to say I think I'm just kind of biased by that and I think the larger the businesses go the less they are in constant in touch with reality.<br> Pulled politics bureaucracy you name it,<br> Financial motivation versus quality all of those kind of things I'm just so biased about that I just think and that's what I when I think about Legacy I think what we're doing in the employee-owned world is we are protecting,<br> the Integrity of American businesses.<br> <br> [34:41] You know I'm just going to say I get I get chills right now even talking about that because I think that.<br> Anything about the opportunities that people have in this country.<br> To to do really really well it to me it comes from working in.<br> Small to mid-sized companies people working hard side by side.<br> And really with the vision and the aspiration of building something that is.<br> <br> [35:10] Helpful to their customers that creates great jobs that provide.<br> <br> [35:18] Great services and great products in that's what Legacy means to me and out of that conceptually when we start talking to people about this I get really jazzed up about it because it,<br> connects back to,<br> what what I think is the most singular overlapping thing for every single he stopped company is they have a great culture.<br> A business culture a employee culture whatever you want to call it they have a great culture which means that people like to go to work.<br> At that place and they're going to want to keep liking going to work.<br> And so that's what a that's what I small midsize company can do it can create an environment where people actually like going to work they like their life it's fun it's engaging it's exciting there's things happening that they're involved in.<br> One of the reasons I mean if I go back in my whole world my story in my timeline as well one of the reasons I never really wanted to be my own the business owner was because,<br> I saw what it was like to work for big Corporate America and it was like I just felt like,<br> for me in as a person I was very I just felt very limited in what I wanted to.<br> <br> [36:33] I guess put into my Ed the energy that I had to put into that organization because I just felt like it was It was a.<br> Such a political and bureaucratic situation I'm just kind of like and I can do all this and then somebody comes in and just unravels the whole thing.<br> For no good reason right for no good reason at all and I'm like I don't want to do that the rest of my life so.<br> <br> [36:58] So I think that between Legacy and culture conceptually these are so profound and they're so good and is the ESOP the only way to do that no.<br> But,<br> it's really van advantageous way because when I connect why is an ESOP if I'm going to keep my company small the only other option I have is I can do like basically can use like a management buyout where I sell the stock to the,<br> to keep person and they can buy me out directly but that cash flow is burden still bike taxes and the ESOP isn't so that's an advantage not that doesn't mean that that shouldn't happen like I said before you can always look at the combination of the two,<br> and or an MBO might be perfect for everybody and they don't want to really worry about the tax been tax breaks and then I have to worry about.<br> <br> [37:46] The requirements that an ESOP has that you don't have with it with the mb0 so I think you just look at both of them when you're in this conceptualizing,<br> discussion and look at what are the advantages and pros and cons I think my very first now I know this my very first ESOP I ever did I spent most of the time in the first couple months trying to convince.<br> Three managers to buy the company from the owners because I'm like this is a great deal for you guys you should do it and at the end of the day they didn't want to take on the.<br> And so it's not always going to work out but when you do look at the those things there they are so there's so many positive attributes to the employee-owned process.<br> From a long-term standpoint and two from a short-term standpoint that I think it's just so impossible to try to ignore and.<br> As I finish I just want to I want to.<br> <br> [38:40] It has you start off this year I want to just challenge people to be thinking about this as I start off with this crazy weird confusing movie tenant I hope hopefully we've cleared a lot of different things but I think the thing I will leave you guys with,<br> that I that I really understand the most in all of this is fine.<br> Somebody you trust that you can talk these things out with where you don't feel like you're obligated to make a decision to move forward.<br> I've got several people that have been talking to for a little while now and we just go back and forth and we have some great dialogue and they're not ready and I always tell people like this I'm like don't.<br> <br> [39:23] Don't move forward until you're absolutely ready.<br> <br> [39:27] And you know the East let me say this in another way to the ESOP world like other worlds is you know it's full of people that want to do business right they want to get the sale and.<br> You know and you just got to tell him like I'm not ready to make a decision I'm just I'm just wanting to bounce some things off you in.<br> Find but when you do find somebody that you do trust me and I think that's awesome and you can just ask them questions and do this dialogue back and forth if you spend.<br> Three months a year,<br> two years in conceptualizing these I mean I don't I think that's awesome you just keep doing I mean I know that some people would tell you stop procrastinating right you know,<br> but you don't this is one thing that I say about like the esops you don't sell your business every day you don't do an ESOP every day,<br> this is a big decision so take your time this podcast is really here to kind of help you do that and listen to these types of things or finding other resources that really help you,<br> I'm today if you like the podcast please share it with a friend if you want to jump into our website check us check us out and get more information on,<br> and what we're doing it's journey to an ESOP.com.<br> With all that thank you guys for listening today and have a wonderful day and we'll look forward to our next step on this journey to a nice.<br><br></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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