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Summary of Podcast on EP29 - Should I stay or should I go? Stepping into your succession plan using an ESOP - The Grid Wiki

EP29 - Should I stay or should I go? Stepping into your succession plan using an ESOP

Journey to an ESOP & Beyond

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| October 11, 2022

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When should a business owner start succession planning?What advice do business owners who sold to third parties have to offer me?Will all of my employees become owners if I sell the business to them?

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This episode we explore the difficulties of the why should I go - the ultimate question to either begin or continue your succession plan. We explore the reasons why you really should plan to go - and how an ESOP could provide an incredible platform to execute successfully on this strategy.

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So everywhere you are today wherever you're going I'm here this is the theesopguy and we are on a journey to an ESOP thank you so much for tuning in today if it's your first time,  at tuning in to the ESOP guy I wanted to just direct you to our website at journey to an ESOP.com if you're here.  Because you want to know more about Employee Stock ownership plans then you are at the right place and so we are in our third season today I'm just excited about today because I'm here,  and I want to kind of just go in and do something that I just actually I thought about man this would be really good one to do and this is what's going to be about first.    [0:57] Music.    [1:26] You got to love.  So you got to let me know should I stay or should I go The Clash a 1981 song guys and.  From an English punk rock band that just went crazy so you probably heard the song before if you haven't I think it says it all in they don't have a lot of lyrics which is cool right because it's.  Boom the question out there is something that we have all asked ourselves if it just works know.  This is a rock song to shake us up and make it real so instead of today instead of rock and roll we're going to do what I call Rock and real.  Because it's getting real now let me just say this as a shout out if you are Tom Brady and you are listening to this podcast.  I don't know why you would because it's about Aesop's but if you are.    [2:23] Basically I'm saying is this really doesn't apply to you so I what what I want you to know is that this this topic of should I stay or should I go is really not aimed at you what we need you to do Tom,  is to keep throwing the football we need you here in Florida go Bucks.  All right so the the definite the definitive question that we have for this topic today for the podcast is should I stay or should I go.  And it's really a universal question I think it's probably something that you've asked at some point in your life and I guarantee you if you haven't you will be asking it whether it's about a job.    [3:01] Relationship something I don't know but should I stay or should I go,  obviously it applies to the ultimate question we talked about esops has if I own this business should I stay or should I go and I love this topic because we get into so many of these,  things that we talked about that are really important to understand Aesop's this is really more about understanding,  that the person who is looking at leaving there's not always it's not always obvious sometimes to them and sometimes they just need to be shaken up a little bit and that's,  kind of part of the theme of this is just a shake up the idea of what is going on why why for the most part our people,  in running their companies to where they're so they're getting so to a place where there.    [3:57] They just keep letting it go every year like why are they in that making the decision to make this happen and I know I don't even care like about Aesop's I mean it this could be anything I want to sell my business to a strategic buyer I want to,  bring up my the next group of people to buy me out on a management buyout of course it's is about ESOP so but the question is still very very hole,  in that what is it what's going on in terms of that so what we're going to talk about today is.    [4:26] That how important is question is to answer in terms of being able to stand understand should I stay or should I go based on where we are today and what's going to happen tomorrow.    [4:38] So this also could apply not only of course to the business owner but also can apply to the leadership group and who's doing what so.    [4:47] Why an ESOP may be what you've been looking for your whole life though to answer this question is kind of the underlying theme of the podcast in the theme of what we're all doing here,  so if you like this podcast and you think it'd be helpful please share it with a friend as I said at the beginning,  check us out on our website there's a place to ask questions if you want to do that,  and as a journey to an ESOP.com and we're just looking forward to this part of the journey.    [5:17] So here are some specific things that I want to I want to point out when we talk about the question of should I stay or should I go.    [5:26] And the main thing is that there are going to be things that we're going to cover in here that are reasons why people should go.    [5:35] And we'll talk about at the end of the podcast why the benefits of actually going what how an ESOP actually makes it better but this is going to be the first part of this is really just going to be about why should you go.  And the first one that we're going to hit on is called is basically the title is you're just too comfortable in your position now.  That's a very judgmental thing to say and that's okay because I'm applying it to anybody and all of us and I can always throw myself into the,  into the area of experience and say I've seen myself in this position where you get to a certain point you've worked really hard to get where you are in your career,  again we're kind of the backdrop of this is that you're actually looking at the work that you've done to build your company and its it's your company.  And what happens is that sometimes you don't see it happening but complacency starts to set in and.    [6:42] You get kind of you don't even realize it but maybe you're just getting bored and you're going through the motions and you really stopped.  Driving when I talk about driving the business forward where there was a fire in your belly before.  You start that fire starts to go out and you start you know you don't really push hard as you did before for New Opportunities you don't really go out you know to to seek out,  you know under the rocks and of things,  and in some of this can happen to because you know business has been successful you know and I think some of that as the business has become successful people in those top positions can sometimes be.  Kind of lured into a thinking of,  and again this is something I think some people can be blind to now I know that other people in your organization sometimes will see this super clearly,  and maybe want to raise their hand and say hey I want to I want to address this and maybe they don't feel comfortable addressing it either and so as a brave.  Person as a courageous person you may want to have people around you that will be able to look you in the eye and tell you things that are there actually true because.    [7:57] Obviously the problem with this this first one is that if that's the case.  Even you know in a good economy everything's going to probably be covered up a little bit but as things start to wane into more of a.  A difficult when we start fighting again for for market share and different things like that happens these types of problems start getting exposed,  and then it becomes a little bit more,  um obvious you know maybe it'd be better for you to address this earlier so so the first part I should I stay sure ago is is hey are you getting too comfortable at what you're doing and,  and especially like let's just say you've made enough money to retire whatever you're pretty comfortable with.  Why would you want to be bored why would you want to be sitting in a position in life where you're just not challenged anymore.  So that's the first thing second thing that we are going to think about as we go through this question is this idea that,  you start getting you and I'm saying this not to you judgmentally but I'm saying it to all of us when I say you.  And I'm going to say like I I have definitely seen these things in my own career tooth but but there's a the.    [9:14] The word empathy the sympathy that you might have there The Compassion that you might have for other people around you starts to kind of Wayne and there and you start to become more insensitive.  And even maybe start to become in some ways possibly unkind and why would that happen and really because.  When things start to all kind of click in you become everything starts to kind of work with you at work in your life,  there could be a sense of well this is just you've arrived you start feeling maybe a sense of superiority so again I the things I'm talking about here are,  going to be true for leaders it's going to be true for people in general in our human nature so,  um don't take that the wrong way but if that's the case if you're losing that level of empathy or sympathy for people and lacking compassion.    [10:12] Then you as a again universally you as a leader and an influencer of a company.  That type of Personality that type of.    [10:28] What you bring as far as energy into the company is going to create some problems and one of the one of the things I've seen in my career is that that.    [10:40] Sometimes that happens at people and in,  weenus I don't see as many people becoming you know stay were super highly empathetic and then they move down to being not empathetic and I'm not saying that I'm saying that people that,  we're pretty good at putting together like they needed to be a good leader and all that and then suddenly they just lose sight of that how important that is and things start to slip.  They can create a culture that.  Can corrupt any road a very solid company and start making that into a company where people are just.  The culture starts to get kind of not too great and then you start seeing it come out in the turnover or people good people starting to leave and those kind of things so that could be the result.  So I've seen this in a an example of a company that that we used to have as part of our,  firm and it was just because the leader wasn't the leader of that part of the practice was not very empathetic at all and we were trying to merge in the you know these cultures and I saw that.  The damage that that did and how important it is for that to be kind of checked in and so that's going to be the next thing to focus on if that's happening then you're definitely going to need to get going right.    [12:00] Should I stay or should I go.  When we get to a point in our careers where we built the business but somehow we've done all these different things but we start to get to this to this dry spot,  and the idea is that we used to have the Innovation that we used to have that energy and they,  the excitement even even their passion for what we were doing that used to just probably really,  draw us into a place of you no enjoyment of deep enjoyment of what we were doing at that starts to go away.  And you just challenge to try to figure it out every time then definitely a good sign to say hey this might be a good idea to get going you know,  and when I say get going we're going to go we're going to talk about that a little bit deeper than just a you should leave but we should really be thinking hard about,  what the next step looks like for yourself and then of course for the company.    [13:01] The next thing is is just a symptom not really a symptom but a.  Are in the area that you would diagnose with every company and just watching kind of what is happening and I mentioned this Earth this part earlier is just this idea of turnover and.  If you have this this continual increase in turnover which would basically be you know Kiki people team members coming and going.  What's going to happen you're going to know like it's going to get to point where your business is just.    [13:36] Stuck can't get any further because you everytime you get things moving you lose that key person or that you know or keep people,  and then you move on now to replace them and then years go by and so you can see some companies kind of Flatline in their growth and a big reason is as they've kind of hit that they've hit that issue,  and the question has to be what is going on in the company is it the people that they're hiring.    [14:03] Is it the leadership is it their processes is that their systems is it that the industry itself there's not much of a future in it so there could be a lot of reasons why,  and so we need to judge turn over and then go back and say what's going on relative to the leadership,  in terms of what's Happening one good thing to do in this category.  I think proactively is to actively measure in your company.  The engagement of your employees and so you should know from a numerical standpoint.  There's a lot of Engagement surveys out there that you can get and you can look at but and you can hire a consultant if you wanted to go to that level but you should get on an annual or even semi-annual basis some level of how engaged your company is.  And it's probably a good idea to look at that by department or division,  with how your business is broken up into different segments so that you can really get a sense for how that is all really going in predict the issues that are going to come down the pike that might not be there yet.  Or if you do know that there's a disengagement issue you can kind of look at the reasons why so some of the ones we've used have been questions.    [15:22] That will ask our employees and then we'll kind of lay those out those questions,  and then look at the groupings of the lowest scores for those questions and then the questions themselves will kind of,  what are the what are the issues of disengagement are they specifically people related are they compensation related or benefits or,  are they that is it the job itself so you need to kind of like nail that down but I think that's a very important part and I'm and I'm kind of tying out in a in a way  into some other business aspects But ultimately if that engagement because in turnover is really happening in your company because of the,  the the leadership will not step down.  Or move on or transition then I think that's a major issue that you have to think about which would be.  Time to probably time to get going another one that's kind of just an odd one that I don't think maybe people see as much but it's just hey.  Maybe you've kind of started to close yourself off you know as the leader you've become more of a more absent and less social with employees and customers maybe you stop going to the work events and Industry events.    [16:40] Which is kind of like a you know when you think about it.    [16:44] If you were working for a company and then key the key person that was leading the company or the key people that were leading the company.    [16:54] We're not showing up for some of these events that the company's having for culture building or whatever then you'd probably say to yourself you know if they don't care to come why should I come.  And so from that standpoint.  Probably is a good time to start thinking about what your next move is and you know you want your company to be successful in and I think on the other side of this it's like.  One thing I think about when I when I come to these things and I will say that a lot of this stuff.    [17:23] Is what I'm talking about is resonating with some of the things I've experienced in my own career because you do get to a point where.  In your what you're doing becomes a bit of a burn out sometimes and you don't even you don't want to see it sometimes or people don't really want to say it to you because they don't even know what they would do you know because all the stuff is has kind of been built,  you know around people that it's really hard to make some changes transitional.    [17:52] You have to ask yourself if you were coming out of college or better if your daughter or son were coming out of college to work for your company what would you want that experience to look like.  To make it meaningful and wonderful place for them to build a career and if those questions like hey it's probably not the best place for my kids to work because of these kind of things maybe I should be thinking about,  the possibility of stepping down or doing something you know different so.    [18:21] In a long the same Lines within this one is understanding that there's there's the possibility of the company becoming more and more toxic with.    [18:35] People that are not because of because of the things that we talked about with.  You're not as involved so you know a lot of the things that we you were maybe putting in place before.  Um have kind of.  The barriers of I guess of those types of things that you know of being really proactive with people communicating with people understanding what's happening and the company as you become as people become more disengaged as leaders,  then there is there is a tendency not that not always but it's there's a tendency for organizations to adopt more more negative behavior.  More gossip type of behavior.  And people draw these negative conclusions because they don't really know what's going on and then that can kind of just create this snowballing effect of,  a toxic environment which really can Road not only the company's culture and then create the the turnover that we talked about but also really kind of.  Can really kind of screw up a lot of the good work that's been done to create maybe good business processes,  to service clients or customers really well or their development of products or anything that the company has really been responsible to do those can be those can directly erode those so it's very it's very important to understand,  that if you are not as engaged as a leader.    [20:05] That can definitely happen and so should I stay or should I go yeah you should definitely get going in some way get move new people up into the,  the place had more engaged leadership and so I've heard this before and I heard it in boards and different things like that but either you lead.  Or you follow or you get out of the way and I think that's just a nice quick quick synopsis a lot of this is just this idea that if I if I am not in a position of really being a good leader then I need to follow somebody that is,  and if I'm not willing to do that then I just think I needed to get out of the way period.    [20:44] So the next thing is really thinking about the the idea of how the future is going to look and so as you piece a lot of that together as you start thinking about,  you don't want to be interrupted when you're focusing on like really what is going to happen in the future and so,  a lot of these things if your future plan.  You know when you're younger and you're building your company and you start thinking hey I know what this is going to look like in you know in the next couple of years or you know I feel great about the next five years I feel great about the next 10 years,  but if you start thinking about it you're like I don't even I don't even have a clue what this is going to look like,  going forward you start to lose your vision and I mean Vision not eyeball Vision but I mean the vision of where the company is going and where the direction is going in the company I think that's a pretty scary place to be.  And that's partly related to the lack of passion the lack of Drive the lack of Engagement and so once you start losing that.    [21:51] Here be your business and if you're really the one that's responsible to create the forecast in the vision of where the company is going then I think it's in and that starts to kind of go away.  Then the company is going to be I think it's in serious trouble,  there needs to be a roadmap there needs to be a communicated you know one of the things I love about the book Heroes are the the traction book by Gina Wickham is it does kind of,  give a very simple way for people to articulate what the vision is of the company's called The Vision traction organizer.  And I think it's just a helpful tool for people to be thinking about so,  again I don't want to get too caught up on what you should do to create a good Vision I want to make sure that if you are aware that you really not creating and communicating an ongoing vision of your company I would say it's probably a good time to get going.  Now as we get into the next things I think it's important to think about a lot of different aspects of our world as people that run companies.    [22:55] And it's difficult sometimes to realize when you are in a position where your stress is just overwhelming.  Partly because people that run companies are very typically they're very driven people right there they're typically people that they're doing this because.    [23:17] They're passionate people they could be type A type people they could be just in it just enjoying the crazy challenge of things and.  What happens is what can happen is is that there's like the boiling the Frog metaphor where it just starts to get hotter and hotter,  you start to lose more and more sleep and stress starts to really affect you physically.  And next thing you know you don't know anything until you go to the doctor and the doctor says,  you know you've got some major stuff going on could be cardiovascular could be nervous could be respiratory could be worse and.  That I know that that has been my experience with some people has been hey you know I haven't seen you for a while what's going on well I went to the doctor and blah blah blah so that B has been come the Catalyst of,  should I stay or should I go well I need to go because my doctors like look you can't handle,  the Stratos nothing you can't handle it but your body is physically not able to keep up with it anymore,  and so we don't realize you know how much damage we can do to ourselves physically and this is the thing I would say to people about this this topic.  Is one of the things the underlying question of should I share stay or should I go is.  Why go this is just the logic of it right why work all these years building this business of inter and just creating all this tremendous value.    [24:45] In the meantime just kind of ruining your health right.  And you know not really seeing all that kind of just paying the price for what you know what it costs us to run a company and then realize I won't have.  The type of retirement I wanted to have I won't have the time with my,  my wife to go and do the traveling or my spouse to go do do the fun things that to see the grandkids to go run around the country and do things that I always dreamed about doing,  because I'm stuck in a hospital room.  You know and I don't want to be too grave like I don't want to be too like whoa I'm kind of dark this theesopguy thing is pretty dark I know I just think it's important to point that out.  Because I don't think people as they get closer and closer through their life like their timeline of life.  Look back and really really think man I should have done a lot more work so.    [25:41] I have I will actually just say I mean I have dealt with this this category I didn't even realize it and so before before I really started doing the ESOP work full time,  I got to this point in my own career where I didn't realize I was overwhelmed by stress and it just starts to it starts to eat at you and I had this this whole situation where I had to really deal with that,  but it was it's a weird thing and that's why I'm talking about it it's probably a good idea because people,  that run companies they don't normally have a lot of people they talk to anyways there they're pretty,  in my experience is they they're pretty driven people and they kind of keep to themselves a lot and so.  Did really is important to kind of even get this out on the table and and I would just go as far as saying of course you know always talk to your spouse about these things that's that's probably the number one thing but get get help you know talk to people that maybe are professionals to ask the question,  if you feel like maybe you can't see it but you're probably thinking this is probably an issue the other thing is that you know if you let this go too far.  The company could be in Jeopardy in one of the things I see in succession planning and exit planning as I do this all over,  is that sometimes the very first thing we got to talk about is what is what's our continuity Plan before we even get to hey we're going to do an ESOP or we're going to do what's going to happen in the event that that.    [27:09] The person in charge isn't really able to go to work anymore.  If that says if there's not a like a good continuity plan than something needs to be put in a place so that the company doesn't just falter because that persons not going to show up.    [27:25] So that's a that's a really important one and so I didn't want to end on that one I wanted to kind of look at this other other thing and then kind of talked about the the idea of how an ESOP would be a benefit for people that are actually ready ready instead of,  staying there ready to go and what that might look like so the last one really is seeing and this is one of the one of the things that I really.  Made me decide to do more of my own succession is seeing people come up in the ranks that are absolutely qualified.  So if I go back to Tom Brady and let's just say you know you're the you're the best quarterback in the country and you're under Tom Brady.    [28:04] But you're not going to get you're not going to get to play right because he's won so many Super Bowls.  Tom Brady don't don't quit if you're listening to this this is really important that you stay here but the point is that if you see somebody under you that super qualified to lead in you're not moving out of the way.  To make room for them then I think that's just a really good reason to go is to say,  I could I could keep doing this job but not in that actually is what as part of what happened to me is like I can see this person has the potential to really fulfill their next step in their career let me get out of the way,  and with all the other things that we just talked about.  Um the value we think about the moving out getting out of the way what does it mean to just step aside the value to the organization can be way way way more than you can realize now that you're not a good leader.  But that the other people have some of those things that you that you had but you're just not as you know you're not,  thirty years old and you are 40 years old anymore you're not in that position where you're ready to go set the world on fire and so so giving them a chance to do that for your organization I think is a tremendously good idea.  And the beauty of an ESOP as we transition in that part of the podcast is that.    [29:24] You get to do it within an ESOP setting in a way that's that's a win-win for everybody.  And so what I mean by that is is the concepts of how an ESOP transaction happens so for a business owner.  They may not want to like I don't really see this honestly for a lot of the projects that I don't see business owners just leaving immediately so when I say should I stay or should I go I really don't as an ESOP mean you go and in the in the sense of you're like you're out of here right,  some people maybe want to maybe you want to get out of there right away or whatever but what I mean by that is that they slowly start to transition,  they control of the company over to other people.  And with an ESOP you can do that you can do that either slowly through partial a partial sale of your stock.  Into the ESOP and maybe you start with some some small percentage and then you kind of keep building up or you can start with a big sale and then also you're still involved,  being being the president or the main person but you're facing that out over over some period of time so that.    [30:37] Succession plan which is a whole nother topic could now take root and start to develop alongside of the transition with ESOP and why that is such a good idea.  Is because what it does is it starts to transition the ownership part of your of what you have invested in your whole life.  Out so you can divest some of your own net worth into a liquid form of asset which is be cash and in addition to the payment of that of that promissory note.  And at the same time the opportunities of your key people can get start earning ownership as a as as well as all the employees of the company,  and then you can all then as you do that you can always then augment that plan for the key people with stock appreciation rights plan so you can really really with an ESOP.    [31:30] If you are starting to go or wanting to go and you answer that question I should definitely get going I think you can do it in such a way that.  Really does allow a lot of flexibility through the process so you're not you're not doing it like overnight and the organization itself can really benefit from,  from the gradual transition of ownership and management duties.  And so and at the same time boost the the morale boost the employment up ownership opportunity for the company boost this this sense of,  um    [32:10] Of opportunity within the whole organization at the same time so that's why all of that starts to fit together meanwhile with other things in the ESOP which are very tax,  friendly types of tools,  you can design that to not completely burden the company from a cash flow standpoint so so it really does create such a great opportunity for the transition of for those that have gone through that list and said you know what,  there's so many things on here that really resonate with me it's time for me you know to start going and now the big thing with that is is planning right and.    [32:47] When you think about it you want to identify some of these things early on in the process and plan accordingly so it'd be nice to have five years it'd be nice to have three years it'd be nice to have,  you know a little time,  to start saying you know what I'll do I'll either do a partially stop now or I'll I'll do some planning at least I know exactly how it's going to go or I'll just start identifying some of these things,  as I start you know checking the boxes off and say oh you know what this really is important and and go and get more involved in understanding what this whole D something's about so,  if I've not done anything really well today I would just kind of point you in the direction of saying investigate,  the Employee Stock ownership plan is an option it's not for everybody but is a really really viable option and and I think the biggest thing in our in our world of.  Transition business transition is there just the reality are there just parts of this country where people don't totally understand esops and that's why we're doing this this podcast,  so that.  When you get to the some of these questions and you start thinking about you know some of the ideas that we just talked about that you would think about Aesop's as a pretty good option for what you're wanting to do.  So with all of that I wanted to say thank you so much for listening today I love this song.  As we go I'm just going to play a few more parts.    [34:14] Music.    [34:33] Should I stay or should I go dude okay I had to do that I'm probably gonna regret that but I don't I don't know if I will.  Enjoy your the rest of your day thanks for joining will see you on the next step on this journey to an ESOP.

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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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