Growing your practice through employee ownership

top of the hour I will go ahead and get started I just wanted to say good morning to everyone and welcome to today's weekly webinar um today we are pleased to have two very esteemed guests from Project Equity Stacy Smith and David Gray I'll tell you a bit about them um Stacy has spent most of her career focused on helping businesses examine their impact and aligning it with their values she joined project equity in 2019 and is now the vice president of program operations and client experience leading a team that innovates and implements employee ownership transitions David is very passionate about helping business owners put employee ownership to work for them at project Equity David helps groups have conversations that lead to creative Client Solutions as well as develop strategic governance plans that support business growth so today this is going to be a great presentation where Stacy and David will touch a little bit more on Project Equity but more broadly what employee ownership transition options are available and how you guys can get involved I just wanted to say a couple of things just please use the chat to ask questions who will be monitor monitoring it throughout the presentation and we'll answer them at the end if time allows and then the recording of this presentation will also be shared afterwards as well so with that I will hand it over to Stacy and David to get started with the presentation wonderful thank you Maddie and welcome to all of you we are just delighted to be here uh with folks from the Bei Network and I had the pleasure of being in person with many of you in August in Denver and so I'm really excited to be a part of this conversation and talk about employee ownership and particularly um growing your own practice through using employee ownership as another tool to support business transitions so I'm going to start off with just a few thoughts um about project equity and why we are here having this conversation with you we are a national 501c three uh non-profit organization uh we are a leading provider of employee ownership transitions ourselves uh and we'll talk a little bit more about how that works with us we also work nationally uh with Partners across the country looking at how to bring employee ownership to scale we think it's a really important tool especially to address economic equity issues keep businesses in their local communities provide meaningful uh transition opportunities to selling owners as well as new opportunities to Future employee owners of the businesses we convene uh we do research we have Capital programs where we directly Finance employee ownership transitions and we are beginning to really look to folks like you um to help bring employee ownership to your constituents as well so to give you a sense of the reach um we are working in specific regions we have relationships with local government in some of those cases where we are helping those local governments to understand the base of small and medium-sized businesses in their communities and help talk about how those can be retained in the community these are some examples of some of our partners and some of these are National Partners as well eox is an interesting network of employee ownership centers by state EO equals we encourage you to get onto that website it's a great website to just bring General awareness about employee ownership to anyone who's interested particularly a business audience last year um these are some of our stats we talk a lot about employee ownership we deliver lots of webinars we um do advertising just to raise the general awareness and help develop pipeline for everyone who is working on transitions um we ourselves have uh transitioned about 20 companies since 2017 and that's increasing each year obviously with covid that slowed down a little bit um and uh we are talking to hundreds of business owners every year about what employee ownership is how it works and how it might support their particular needs so David and I are thrilled to be here um we are working daily with clients on business transition issues so we're super excited we're super excited to bring you the information and answer questions and just get into dialogue with you um we're going to talk a bit quickly about the state of business ownership just to position you know where employee ownership sits we're going to talk about what we mean by employee ownership and many of you are familiar with esops and plot Employee Stock ownership plans you may be familiar with other forms of employee ownership but we're going to talk through some of those we're going to talk about when is employee ownership a good fit even the right fit for a transition um we're going to talk about how the deals get done particularly how how they are financed and then we're going to talk a little bit about growing your own practice how do you embed this and how do you make this a tool to really continue to grow your own practice with regards to exit planning and we've left some time as Maddie mentioned for Q a at the end please go ahead and put your questions in the chat and we will take those um so Maddie did such a great job of introducing us both I'm not going to go back and do that again and I'm just going to pass the Baton to David thanks Stacy so what I'd like to do is just kind of set the context we're all living in this context we understand our present economic situation that there's a lot we don't know is going to happen um and there's a lot of impacts that we've all been experiencing so I just want to jump to some of those to kind of lay out what we're seeing kind of in the landscape I'm sure you're aware of these things so covid we're all aware of it it's impacted us all in personal ways but also in our local communities our businesses and so one of the things that we are seeing well I see when I'm talking to owners all the time is a heightened level of burnout the number of owners I've talked to where the business was going well covet hit they had to scale things back and then things ramped up again in the last several months and then folks just start to get to the point where they're like I don't know if I can do this again and so that's caused a lot of employers that we've interacted with and I've spoken to to say you know what I'm ready to leave sooner than I thought I might have thought I was going to make it till 65 70. but you know what I'd rather kind of slow it down you're all aware of the Baby Boomers that own so many of the businesses here in North America we've estimated roughly 50 percent of job creating businesses are owned by Baby Boomers and that is a dynamic that is impacting all of the small towns large towns that we're a part of the other thing that we're seeing quite a lot is serial entrepreneurs I've got some clients that are those gen xers like myself that you know it's like I start a business I get it going and then I wanna do something new and so we're funding those folks as well so these are creating great potential opportunities for us when we look at the transition to employee ownership one of the things we do a lot here project Equity is try to get deep analysis and deep understanding of what the present situation is and so we do studies we do data studies you can find some of these on our website where we're looking at the present reality of business ownership throughout the states I would really say this would be a key resource we'll be sharing resources at the end of this with you all so don't worry you'll have that information but I did want to draw your attention to that as well and the reason I flagged this is our work really is rooted in data it's rooted in research and really trying to find those best practices we can jump to the next slide so you know I don't know where you are at when you talk with your clients um we do a lot of that talk with a lot of people as Stacy said we are kind of on the ground all the time and what I wanted to share a bit though is just the reality from my own personal experience what brought me to project Equity so I was working with Habitat for Humanity and I was working in the San Francisco Bay area and part of my role there was partnering with small businesses mid-sized businesses to get donation a product for our stores over the course of just a few years I worked with over 60 to 70 business owners that couldn't sell their business I remember I had a window shop just outside of Oakland beautiful Window Shop they'd been there for like 30 40 years and the owner just he couldn't find the right buyer and he just needed to move back East with his family and he was like I just gotta wrap up shop another interaction I had was a hardware store it was a family-owned hardware store multi-generation and the Next Generation just wasn't interested in buying it they weren't running they didn't want to run the business and so what I experienced there was that there were multiple businesses that there wasn't a solution for how to transfer ownership and so they were just wrapping up shop when I heard about project equity and the work they were doing I was like this is a solution for the problem I'm seeing on a daily level and so that's what really brought me to project Equity so we're seeing that you've got a lot of business owners that are retiring you've got business owners that their kids aren't interested and I don't know if you've all seen this stat but roughly only one out of five businesses that goes on the market in the states is ever sold you got the next slide that'd be great now when we look at employee ownership what excites me about it is IT addresses multiple issues that are clients the selling owners have I was reading a report the other day and it was talking about what are the driving questions selling owners have what are their desired outcomes the top three of those driving factors the first one I'm sure won't surprise you it was value they wanted to be able to sell their business for a fair price although the second one was the Legacy piece they want to preserve that business they poured so much of their life into they wanted to ensure that it was going to continue to live that it was going to continue to be in the community and the third value that they held was for their employees they knew that the employees were the ones that helped build this project together many of the businesses I've started I you know I might have been the lead on it but I knew I could only get there because of the folks I was working with what employee ownership does it allows business owners to sell their business to maintain that Legacy to get a fair value to benefit the employees and then there's also potential tax benefits Stacy I'm going to hand it over to you here sorry I was on mute so what do we mean by employee ownership so many of you have probably helped your clients transition their business to a family member or to key employees to do a key employee buyout or in some cases a third party transfer to um to an outside buyer strategic buyer maybe maybe a peer organization that kind of thing when we use the term employee ownership um we are talking about something that is broad-based and that means that all the employees in that organization have the opportunity to become employee owners um so it's not just the key employees who are going to get an equity you know stake or some stock options or just a few employees are going to buy out the business um it's a it's a mechanism whereby all of the um employees are going to have that chance to share in that ownership and David has talked a little bit about this but one of the reasons that we find it so exciting and a really good fit in a lot of situations is these are fair value transitions these are not discounted um they are fair value and they may not be the same level of um value as a strategic sale where you're looking at 10x ebitda and above but most employee ownership transitions do happen between 4 and 7x ebitda depending on the particular business the industry the location Etc the other thing is there's a ready buyer um you don't have to go find the buyer and make the match and go through the process of assessing fit and culture and things like that the buyer's already there the employees are there they know the business they know how it runs they know the culture they know the customers the suppliers Etc owners can retain a lot of influence over the process so they can they can really impact the pacing the timeline and the structure so they have a bit more autonomy in the deal than when it is an outside buyer coming in and as David really mentioned one of the things that we find so important to so many buyers is that Legacy piece whether they are a first gen owner who built this themselves or their second or third gen who are stewarding it but they don't have that next generation of family to bring it in there's a deep caring about the company the brand the um the position in the community Etc and these are all things that employee ownership really impacts um it also creates stronger businesses and communities and so there's been a lot of research done and so you can see here just a couple of the stats about what employee ownership can do for the company and the business performance itself really important especially if you're talking about as David said you know maybe a mid-career um owner who's looking to get some liquidity maybe they aren't ready to completely divest to the business but they want to partially divest and hold on to the business as it grows um before they fully exit this is a great way to really ensure that kind of ongoing growth and stability so how do we do this many of you know about esops Employee Stock ownership plans and I know you there's some great sessions at the Bei conference addressing this as well it is a wonderful form it is very well suited to medium and larger size businesses um an employee stock ownership plan is where there is a trust that will begin to acquire or acquire all of the equity and that Equity is then allocated to employee participant accounts and that those accounts are then accessible to the employees as they retire management really stays the same in an ESOP there will be a board of directors and the trustee of the trust won't influence who is going to be on the board of directors and interact with them as uh the trustee sort of acts as the owner in that situation but we have two other forms of employee ownership in the United States available to us and what this does is means that employee ownership is then available to a wider array of businesses worker cooperatives and employee ownership trusts can be used in medium and larger companies but importantly they can be used in medium and small companies even Main Street businesses those Bill those businesses that are you know maybe a million two million in value these are really viable structures to get those businesses sold at a fair value so in a worker-owned Cooperative it the business is going to be owned by the employee owners they will have a share in the profit as opposed to the retirement benefits they will annually or quarterly share in profits they will also have a voice on the board through a voting mechanism employee ownership trust a little bit more of a hybrid between the two it's highly customizable so we see employee ownership trust is a great tool for a partial sale something we call an on-ramp to 100 employee ownership let's say we just want to do a 30 sale right now or 49 sale right now this is a great mechanism to do that the other forms can do it as well but this one is particularly flexible again the mechanism for employee benefit here is the profit sharing on an annual or quarterly basis so we're excited that we have those different site those different mechanisms and employee ownership companies we really see them all shapes and sizes all Industries um so these forms are really great and flexible and we can take them into a lot of use cases I'm not going to read through this chart but it's a good reference for you um as you are thinking through your particular clients and what might be a fit um David had mentioned some of the forms of employee ownership can lead to tax benefits um and the deferral of capital gains for the owner that's esops and work our own cooperatives so they can they can opt for a section 1042 deferral on their capital gains getting that additional bump um in the in the tax deferral um the there are also tax benefits to the businesses esops one of the reasons they are very popular is if you become an S corp ESOP there is tax avoidance for the business itself leading to a lot more um capital for investment and um and also to to put into employee benefit um but the co-ops and the eots they also you can deduct all of the profit sharing piece there so a slightly lower tax um can result in that uh we mentioned that um partial sales are a real opportunity here um and all forms will will support a partial um sale so this is a good little comparison chart for the future great so the reason I'm here on this webinar to talk with you all is because I get a chance to work with a lot of the clients I want to share some examples give you some snapshots of some of the types of businesses that have really benefited from employee ownership um you're going to hear us reference a lot of things about employee ownership and I come back to one of the slides I referenced earlier where it's able to address multiple desired outcomes for the selling owner I oftentimes think that when we're looking at addressing the needs of a selling owner it's almost like when you have somebody doing house shopping like they may be saying all right I've got these top high priorities that needs to have three bedrooms and two baths or it needs to have a nice big yard or be surrounded by the forest now that might be their top priority but sometimes you get down to it they've got another one right there or another two or three they're also really important I was talking with an exit planner a while back ago and she was talking about a deal she was moving forward and at the last minute the owner pulled out and said no this doesn't address this other issue that I had and the parties were really focused on that sale price and not looking at some of the other issues that were important to the selling owner so what I want you all to think about is the clients that you have the folks that you talk to the folks that you know that own businesses and think about if employee ownership might be a good fit for them so that's what I'd like to address now is talking about those different different ways that I think employee ownership can really address those deeper desired outcomes on the selling owner the next slide that we're at really kind of focuses on Legacy and so when we've you've already heard us mentioned a couple times his legacy is really important so what I I had one owner I was talking with and when we were kind of going through the process I remember he just said this in passing but he said yeah you know I really want to be able to drive by the shop and see the name on the sign still and it just hit me that this was like that deep longing that he had it wasn't like worth X number of dollars to him but it was something that was tangible he'd put his his work into this community he knew the businesses around the corner people referenced him he had good reviews on Yelp right it mattered to him so what I have seen is is with lots of business owners they want to reward the employees I talked about this earlier they want to make sure you can leave the slide up that's great uh you want to make sure that you're kind of benefiting those folks that help build this thing with you but there's also this desire to benefit the community one of the things I saw when I was working in the Bay Area and I saw these businesses close these businesses took a lot of the tax support of the local community out and you know there would be a new startup that would come in but they'd throw a lot of their money at buying equipment covering all those kind of startup business costs and it took a while before the money that that business was creating really kind of seeped into the community and so we oftentimes see these Legacy businesses as key businesses for the support of that community and business owners know it they're probably on some club right they've donated to the local school they might have their sign up at the football games so optimax systems is a business that converted to this model of an eot employee-owned trust it's in Rochester New York the owner had been there for many years 20 25 years and he knew he was needing to step out but what he wanted to do was make sure he could figure out an approach that would ensure the business would stay on for the next hundred years so he thought of selling to the management team but he knew that that would only be a solution for maybe 20 25 years because then they would be hit with this question again of what to do and the trend in their industry is that big multinationals would come in and buy it and he was afraid that when he was plotting out the direction the business was going he realized that in 20 25 years the business would be worth too much for local folks to be able to buy it from the management team so he found that employee ownership was a great opportunity for him to transfer the ownership of the business to the trust and have that trust be there to ensure that business would stand the community that those 500 jobs that were there in the community would stay there and benefit folks long term one of the other things that we find employee ownership addresses is the difficulty to sell a business it can be hard I find that one of the things that is challenging in North America is we have this this myth of ownership that you know if I start a business and it's going great I'll be able to retire I'll sell it and I'll get the yacht and I think a lot of folks they see those ads those Visa ads those financial advisor ads on TV and they think yeah I can do that I'm not too worried about it a lot of times I find that they haven't thought through how difficult it might be to sell their business so they might have a niche product or they're unique in the marketplace and so finding the right buyer will be challenging they also might be too small or just that the wrong size to make it really attractive to folks I had one owner who had a tech company and he was afraid that if he sold the business it would be split up because they'd only really want part of the business he had a unique thing where he pulled together two different dynamics of technology and he built this business for it and he knew that only one of them was going to be really sexy and so it made the business unique in that regard the other thing I've seen is that management especially in economic uncertain times like we're in right now might not have the capital or the risk tolerance to buy the business from the selling owner and so employee ownership allows those key managers to be able to still have a piece of ownership still see profit sharing but also be able to do it as a part of a team and not take all of that responsibility on themselves so if you go to the next slide I'd like to talk about one of our clients here this was a client that really kind of hit this these unique things they were a special specially glass blowing manufacturer that does scientific glass stuff I've never been there but you know it's that kind of like Niche thing where I can I can't really imagine I like seeing you know glass blowing and thinking about how that could be done and that's a unique skill there's only a few people that really need that type stuff right those that business is in the Rolodex of just very few clients or customers so when the owners here were thinking about selling they clearly were in this you know silver tsunami Baby Boomers that own the business they were reflecting on what they could do and they got to the point where they realized if they sold the business they'd basically just be selling The Client List that's not what they wanted and they were also afraid that that was going to undercut the value that they could get for the business so by selling to their employees they were able to keep the customer base that they had they were able to get a higher value keep those jobs and it gave them an opportunity to sell when there might not have been a buyer on the market for that the final thing I'd like to talk about is the flexibility of the sale that employee ownership can give so if you go to the next slide I talk about how employee ownership can create a lot more opportunities to address the unique needs of a selling owner so maybe the owner just wants to get some liquidity right away they need cash so they can start the next business they want to do a partial sale they're like hey I'm kind of tired I want to still do this maybe 15 20 hours a week I really like this Dynamic of the job but I don't want to do the rest so what employee ownership can do is add a option for a gradual exit over like say three to five years and allow that owner to take the steps back on their timeline rather than somebody else's so one of the clients that we've seen has done this was if you go to the next slide point B Consulting so point B Consulting became an ESOP the earlier when I was referencing the glassblowing shop that was the worker Co-op sorry didn't highlight that but I'd like to so point B Consulting wanted to move to being an ESOP you're familiar with that approach one of the things that they found is they were in the Consulting area and so what they needed to do was figuring out how they could set themselves apart in the marketplace and employee ownership was one of those ways of doing it so now when they are looking to hire new staff when they are finding that crunch of being able to recruit key employees they have found that because they have employee ownership as a key component of the business when they're hiring folks they're not just hiring an employee they're hiring future owners and the employee that's being hired recognizes that as well and so if they see a job offer where they're like you know I could do this one or that one this creates a unique opportunity and you know it's almost like that bragging rights I don't know if you've heard this I've I had the chance to talk with owners now that are the employees that have become the owners it's really fun when people ask them hey what do you do for a living well you know I I own a business right and so employee ownership allows that piece as well but um I'd like to announce pivot over and let Stacy kind of address some of the next things on how employee ownership occurs some of the things that are coming through in the chat so all three of these mechanisms that we have they provide a risk shield for the employee owners so much like in a corporation um the the owners are shielded from a lot of the liability um that is the same for all of these um there was a question about whether an eot is a qualified plan it is not so a worker on cooperative and employee ownership trust they are really flexible they are inexpensive to create and move into whereas in ESOP is highly complex and takes a lot to put in place but you get some of those tax benefits down the road which can help offset some of that complexity but the work our own Co-op and the employee ownership trust have a lot more flexibility they don't have the same compliance issues and far less expensive to put in place um the other thing that we're going to talk about here is how do we do these deals how do we get them financed in particular David talked about like a lot of time your key managers don't have access to Capital they don't want to do a personal guarantee they also might not be super cohesive and on the same page about things so it's not a good fit and you might think of that and say well then how are we going to get all of the employees on the same page if we can't even get the management team on the same page so the way these structures work they are the ownership structure we are really impacting ownership here we are leaving management and operations largely untouched in some cases we are replacing the exiting owner we may replace from within we may replace by bringing someone from the outside in um so the transition process this is not you know anything super unique I'm sure many of you are looking at a very similar transition process when you're going through it there's early conversations exploration um understanding the options understanding how this will meet needs as David has said you know your clients really have probably multiple needs they may present with one or two strong needs and then um as you start to peel back the layers behind that there may be some other needs that they're really trying to meet through this process so that exploration process is really important then we get into due diligence um what is the value of this business does it have the management capacity in place or do we need to replace it what is the kind of timeline we are looking at and then really getting into the the nitty-gritty of the transition process so structuring the business looking at the governance structure looking at the deal terms getting the deal terms really hammered out putting in place the financing and we're going to talk a lot about financing in a minute so that you can close the sale um and then there's work to do afterwards it's not necessarily done by the folks affecting the transition but as David said you've now got a new group of employee owners and there is um some some work to um to ensure that this is going to thrive as employee ownership and so you saw those statistics like employee-owned companies there's fewer layoffs they grow at a slightly faster rate um there um are they retain their employees over time so those things are a result of ownership culture and ownership culture really dealing be being built and deepened over time so that everyone has that feeling of like I own the business I'm part of this I'm not leaving I'm going to be here I'm going to help grow it I'm going to help make sure it thrives so um a lot of questions about financing this is a great question and what we want to say is there are financing options here some of them are really common and well understood and others are a little bit unique so when we look at the sources of financing most employee ownership Transit transitions are leveraged transactions so there's debt involved in the buyout and that's great because that means the owner has a cash take at the time of the sale so that cash take is going to come from senior debt um banks will lend senior debt cdfis Community Development Finance institutions will lend um they are very familiar with employee ownership and these different structures um so usually we're looking at the senior debt being lent on a basis of an ebitda multiple or debt capacity of the business based based on a set of you know pretty rigorous projections we see these loans coming in somewhere between four and seven years is usually the max 40 to 70 percent of the sale price is usually coming from senior debt here um really importantly there are not personal guarantees tied to the senior debt so again that's a really important thing these in these future employee owners their credit rating is not getting hit they are not asked being asked to put money down and they are not asked to be given a personal guarantee so I see a question in the chat about a capital call a capital call does not happen for the employees and I'll talk a little bit more about that in a minute so how do we get to the rest of the sale price there's going to be junior subordinate debt largely seller financing so there usually is going to be a seller note or an earn out we've seen a lot of our announce um due to covid or warrants in the case of an ESOP in particular that debt is usually going to unfold over five to ten years um in an ESOP sometimes you can't start the pay down of the seller note until the senior note is paid off that's not the case when it's a worker-owned co-op or a trust so that's again a little added flexibility and sort of speeds the process of the payback and then there's other sources um so we do see non-voting preferred Equity sometimes in the mix here and particularly um if that is you know that can be an incentive for some key employees to to get them a little uh bump in another way in some cases we've got meds debt in place as well and in the um in the case of a worker Co-op sometimes there is a little bit of employee Equity it's what's called a buy-in it's usually um it's usually pretty nominal so somewhere between you know maybe five hundred dollars and five thousand dollars usually not a meaningful part of the sale price so sample transaction here just to give you a sense again this is going to be super familiar to y'all because I'm sure that you are structuring you know um lots of deals and pretty sophisticated deals so here's a sample company you know we've got about 16 and a half million in um Revenue about 1.3 and ebitda coming in an evaluation around 4 million um we're looking for a transaction price right around there but you can see we we oftentimes think of it as a best in base case so um you know we might be looking at putting an earn out in place because there's a good promise of some growth in the business um so we're looking at initial liquidity at 60 of value so that's going to come from your senior debt um that that first piece of liquidity and then the rest of the liquidity over a period of time with the seller note seller note has interest attached to it so there's going to be some interest payments on that seller note um and in the case of a best case calculation and an earn out there's maybe earn out income over some usually the same period of time as as would be typical to a seller note so maybe five to seven years um also tax savings so if this is going to be an ESOP or a worker on Co-op again these and and the business is um a C Corp then they can go ahead and elect to defer the capital gains on the sale and so there's another bump there from that tax savings if that is the case um so you're looking at total Financial benefit you know in a base case of about 4.7 million and in a best case of about 5.2 so I think what I want you all to take away from this is these transactions can be pretty Innovative they can be pretty flexible and they mimic a lot of the other deals that you may be structuring and that again is because there is capital to finance these deals um so as I've talked about there is friendly Capital bill when I say friendly Capital so increasingly some of your the the financing institutions are familiar with the different forms of employee ownership and as I said that that lending is happening without personal guarantees and there are other credit products so a lot of our clients need a line of credit at the same time they're you know they're transitioning ownership so we've got to match that line of credit with the transition loan there might be need for other credit products um organizations like project equity and Us in particular we have our own funds as well that we are putting into the mix and that's really great because our funds can be paired with other funds it down it downplays some of the risk there um the other thing some of these uh I will speak to what is beginning to happen is we are seeing some movement at the federal and state policy level so um there is something called the um State small business credit initiative so that's an initiative by the treasury Department where states can access funds to underwrite um and down down play some of the risk on loans the move is to have the SBA remove personal guarantees in an employee ownership situation so right now it is hard to get SBA funds applied but we are working at the policy level to change those and some States state of California in particular has already set up a big loan guarantee program that all employee ownership transitions can qualify for if the financing institution goes after those guarantees so so the message is like we're working hard at it there is capital available there's a lot going on to bring more more Capital to the table that's really friendly to these transactions I'm going to pass it back to David thanks Stacy now you're here because you're in the exit planning field and if you're like me I worry about my business I worry about how things are going and how things can impact in a positive way so what I want to talk about here just briefly as we wrap up and make sure we create space for time to do more questions and answers I want you to think about your own practice I want you to think about your clients or the clients that you want to get and I want you to think about like what are their desires what are their needs I mean it's obvious they're going to want a fair price that's kind of a given we all you know most of the literature most of the work I find in our our field is talking about how to increase the likelihood of a sale or how to increase the value of the business right that's an obvious one but it's like what are those deeper things and so you know when we talk with exit planners we've oftentimes had them work with their client and walk the whole journey with us so right now I've got a client I'm working with it's in the last stages of selling to the employees and the financial advisor who's also an exit planner has walked with them the whole way through that process we also find that oftentimes owners want to bring in their CPAs or their wealth planners to talk with us and so one of the things we're able to offer is to answer those technical questions answer those like the fear question that the CPA has that's been walking with this client for say 30 years and they're like wait what's this crazy thing you're trying I've heard of esops but I'm not sure about a worker Co-op so we're able to get on a call talk with folks and and do that the other thing that we can do is if we partner with you in ways is sometimes we come in we do in-house presentations for your team if we get enough folks it might make sense for us to come in and talk about this is as Stacy alluded to earlier our mission as an organization we're a 501c3 and our focus is converting showing that businesses can convert to employee ownership educating on the options and really creating a movement and so education is a key place and so what I'd ask you to think about is would you like to deepen your understanding of employee ownership you might have a really solid understanding of saw but eot might be a new thing or worker Co-op team I think that's just for San Francisco for small businesses that's not the case I've got an entertainment company I'm working with in LA right now that's going to become a worker Co-op right so the variety and opportunities are are really there for you so if you go to the next slide these would be the things I'd encourage you to do right I'm not going to tell you what to do I'm encouraging you I'm just kind of like a soft nudge saying you know look through your client base think about which of them would be a good fit for employee ownership learn more if there is one that makes seems like a good fit check out our website we've got lots of case studies you can read through you can share with your clients there's other players in the field right we're we partner with a lot of developers in the employee ownership field we have great resources we'll be sharing those with you later possibly you might want to partner with one of the providers you might have a client that you'd like to bring through this process where you've got a client that's got a solid business that hasn't been able to find a solution for that exit desired this is also something that I really believe will help grow your Client List I think when you can put out new offerings and set yourself out there in the marketplaces offering something unique that might address questions like Legacy this could be really helpful for you so the final thing I'm going to put out there is you might be sitting here saying this is so exciting I already know how to do this in other ways how could I become a practitioner in this too we'd love to talk to you as well we are not wanting to be growing to 300 employees and be the national place where everybody goes to be converted to employee ownership we want to create a movement we want to train you and encourage you all to be able to do this work I'm going to go ahead and wrap there Stacy I don't know if you have anything else you'd like to add before we just open up for questions I think we should open up for questions now and I see some stuff in the chat and um I'm gonna stop sharing my screen for a minute um so that we can you know maybe get a little more of a dialogue going on um I will go ahead and take one of the questions from the chat here the most recent one so these programs are meant for the broad base of employees so so in ESOP by law has to be available to everyone work our own cooperatives and employee-owned trusts the same thing so these are broad-based and that broad-based nature of these is what's leading us to be able to access financing the way we are and to be able to um in the case of an ESOP qualify for those um uh tax benefits um but in the place of a worker on Co-op and employee ownership trust again really be able to have a mechanism that all employees can access and downplay some of that risk so if if you're really looking for something for key employee management buyout this these are not the tools for that these are the tools these are an alternative tool for that let's see and I think Natty if you want to help us navigate some of the questions here that would be great yeah absolutely um I've been monitoring the chat as well I know you hit on a couple of them so we'll just try to do at least a few why we still have time um so another question is that um employee ownership programs must include all employees or can it be used for just one or two key employees that would like to buy their firm from New York yeah that's the one I just answered there so it's really this is really the broad base and not for for key key management buyouts yeah okay I will dismiss that one um another one is from Don he asks how he can become an employee ownership practitioner great question uh great question thanks Don um David really addressed uh some of those those key steps there I think beginning your Learning Journey um and we're going to show some resources here in a minute really beginning that Learning Journey yourself um getting in touch with you know project Equity we can help um there's some depending on where you are geographically we might you know be able to put you in touch with some others who are really doing this work typically ESOP Consultants specialize in esops they are as many of you know complex highly technical there's a lot of training involved in doing esops um worker on cooperatives and employee ownership trust do not have that same level of technicality um and compliance those are easier tools for folks to learn and then apply and so there is there's training and how to do some of this and in any transition that you are doing you know there is an ecosystem of service providers that you are bringing together you know if you're not an attorney you're bringing an attorney to the table um you know you're bringing other financial advisors that kind of thing in these it's the same thing so in addition to building your own skills it's also building that network of providers who you can bring to the table to do these as well I think a good place to start we we are happy to to really talk to folks who want to get started on this journey and so you can be directly in touch with David or I and we can start to point you in some of the uh directions here at this moment in time there is not a One-Stop shop for advisors and professionals like yourself to learn everything in one foul Suite but um we are certainly exploring ways to do that and um you know let's we'll talk to Pei that might be a venue to bring more of that content here as well great and I guess kind of to piggyback off of kind of what you were saying uh with the answer to that last question Jason asked um he is in Minnesota in the Minneapolis St Paul area and was wondering if there was a local representative there or um if you could just put on that a little bit yeah there there's some there's some great employee ownership activity in the state of Minnesota and in Minneapolis St Paul there are a couple of really top-notch attorneys working in this space there's um a community-based organization called Nexus Community Partners um they really focus on worker co-ops but they may be expanding their portfolio but happy to talk to you and and and make a reference on um and a connection to some of the folks there yeah and let me just also chime in there um one of the things I don't know if we really kind of focused on is we were already a remote organization before covid and so we have clients all over the place we have really kind of tailor-made our process to work in like a zoom environment like this so what we find is we can do much of this work remotely and then you know we can come in do some of that hand you know the one-on-one or kind of that in-person work as well so there's a lot of options there but it's a great question Jason great and then to those there were also several questions to just being asked to be um connected with you guys so we will be sure that everyone that asked to be connected with you has your Converse has your contact information and um vice versa but there were a couple other questions unrelated to that so I'll see if we can answer a few of those um Michael asks if um he says is the earn out income predicted on extraordinary growth assumptions if not ordinary growth is already part of the valuation correct yeah that's absolutely right that's absolutely right yeah the base case is going to be your typical predicted you know growth based on past performance and market conditions and earn out is usually pegged to what we call a best case you know maybe extraordinary maybe not quite extraordinary but um you know uh much better positioning we see we model earn outs a lot to if there have been recent Investments um that are you know not fully producing their promise um we might model something in a base case because we don't know if those Investments are going to fully pay off the way they are hoped so that's going to wind up in the extraordinary or the best case assumption there great and then it looks like I think I see one here that I know you haven't answered one of them I think you already have um but one of them Tom asked a little bit earlier on in the presentation um he just mentioned that um The Cooperative idea and the trust idea are very attractive and a lot of times the big obstacle is having the funds um yeah just curious about those strategies I don't know if you want to touch on that any yeah yeah so that's what we're really trying to talk about in the financing there so so the funds are available and um that's that's the big deal when when project project activity has been working you know for more than eight years on this and one of the things that we started working on immediately was that barrier to financing and so um there are financing Partners available there are cdfis Community Development Finance institutions you may be less familiar with them but they exist um they exist nationally and they exist in local communities um on some of the state by state or region by region basis so those funds those finances fund that senior debt money really does exist we're happy to help you uh think that through for any transaction that you're working on and where to go for that and as I said we're really working at a state and federal basis on policy that would unlock more of those um you know guaranteed uh funds like SBA funding and things like that great and then it looks like we've got one more and we probably have time for about one more um so the last one here I'll ask is another one from Don he says During the period of time the owner is carrying financing how much influence does she have on both day-to-day and strategic operation of the business and how does this happen David you want to take that one yeah sure that's a great question yeah that's that's a key thing and part of what I really appreciate about the work we do is it gets both parties aligned with the same goal that's the long-term future success of the business so what we find is one of the more common ways of doing that is the owner will be sitting on the board of directors and have a say there in those key governance decisions and questions um with the earn out too that also benefits the desired outcome for both and so both parties are really interested in kind of keeping that institutional knowledge moving forward I've got a client you know in LA area the owner had a real successful business the employees were doing great she was on the board of directors for about a year year and a half she's like you know what you guys are good so she applied to proxy to sit in her place on the board and so she's been able to gradually take herself herself further away from kind of that daily process but the the key thing of here with regard to like the daily operations ideally that management structure is already in place and if the selling owner is key in that management structure we will then work at trying to figure out what type of management transition needs to occur so that that struck org structure is able to maintain and move forward in the years to come anything you want to add there Stacy no we're probably good so I think if you don't mind sharing again we wanted to get to that last slide these are those resources we were referencing earlier these are hyperlinks so you'll be able to get into there you'll be able to see these resources there's a lot of players we are one of the leaders but we are doing it together with others and so I'd encourage you to look at that and then I know there have been a lot of you that were asking for our contact info I've put it in the chat a couple times but here it is for you as well yeah yes thank you guys both for sharing your contact information that was a lot of um the questions being asked and it looks like um from what I can tell we seem to have covered everything else um in the chat if not I will make sure to get any questions that come to um Bei to you guys and then like I mentioned at the beginning of the presentation we will get the link shared to this recording into any of the resources you guys want to share um we will get that sent out today and we will get you two both connected to any of the participants on this call who are looking to get in contact with you um so thank you guys both I don't know if you guys have any final words you want to say before we wrap up but um just wanted to say thank you for your time thanks oh it's our pleasure this has been a blast I hope it's been helpful for you folks please reach out we will try to um reach back to some of the folks who have mentioned um they would like to be contacted in uh the chat we will do that when you get the slides those are all hyperlinks including the early slide with the data study really encourage you to get into that data study take a look at um your region sort of where you are focusing on um might be informative as well as you're just thinking through your own marketing strategy for your practice so um thanks so much everybody have a great day thanks everybody yep thanks everyone