Business Succession – have you considered equity participation?

Business Succession – have you considered equity participation?

By Adam Dierselhuis

We’ve been working with a couple of clients recently to assist them design an equity participation model for some of their key team members.

As a succession option, they feel it has a number of advantages including:

  • Recognition of team member’s efforts
  • A retention strategy for those key players
  • Introduction of the next generation of leaders
  • Continuity for clients and employees; and
  • Perhaps most importantly, preservation of what the business is about.

We feel that same way, and that’s been our own experience.

Thought needs to be given to factors such as: who is eligible to buy, how much equity is to be made available and over what time-frame, what’s the purchase price, how will that purchase price be funded, etc.

Needless to say there is no one size fits all approach – but certainly one factor that is critical to the success of any equity sharing model is the understanding of the model itself and that employees truly feel empowered by it.

Done well, employees possess a deeper connection to the business which in turn elevates their thinking to continue driving the business forward.

If you or your business associates are considering offering equity to your employees or would like to explore how such a model might work in your organisation, we’d be more than happy to share our experience with you.

 

Image credit – JeongGuHyeok