For those who have built a successful business, there are multiple options to exit.

A trade sale is perhaps the most obvious. You find a third party who wants to buy the company. Normally this would be a bigger competitor, who offers a healthy payout for what you’ve built. However your brand will likely be abandoned, staff made redundant due to synergies/cost savings, and prices to clients hiked so the buyer can recoup their costs.

For some business owners who have built their business from scratch, this is often not an option they relish even if they know they need or want to step away. Some may really want to ensure the future of their brand and also their team and will be reluctant to see what they have built evaporate into a bigger entity.

Private equity or Initial Public Offering (listing on the stock exchange) are also options. Again these can be lucrative, but they also lead to loss of control of what happens to the business afterwards.

For those wanting to keep the business independent, Management Buy Outs used to be a common option. The up-and-coming senior team buying out their older counterparts. Sadly these are becoming less and less feasible. Decades of stagnant wages relative to house prices have meant your average 30-40 year olds have no scope to raise the cash wanted by retiring 60 year olds.

There is another option though. One which keeps the legacy of the company, secures jobs, and hands power and future profits to the staff. With this option, you control the timing, and choose how and when you step back from your responsibilities. It still enables you to get a decent payout for what you’ve built to date, and the sales proceeds are typically tax free!

Is this some innovative scam, or aggressive tax avoidance scheme? No. In the last few years, as well as having been adopted by over a thousand small companies, it’s been done by high profile brands like Richer Sounds, Ardman Animation, Go Ape, and Riverford Organics.

It’s the Employee Ownership Trust (EOT). A structure famously used by John Lewis for a century. Made more viable by legislation introduced by the coalition government in 2014. Currently 1 in 20 business sales are to EOTs, with circa 1,500 and counting now in the UK.

Employee-ownership is defined as an organisation in which all employees have a “significant and meaningful stake” in the business. This means they must have both a financial stake (i.e. shares, directly or indirectly; and a say in how the business is run, known as ‘employee engagement’.

At the recent Employee Ownership Conference, which took place at the Arena and Convention Centre (ACC) in Liverpool more than 700 delegates from the employee-owned (EO) sector, including business leaders, employee owners and professional advisors came together to discuss the future of EO. The conference showcased keynote talks and panel discussions from EO experts, provided networking opportunities, and hosted the Employee Ownership Awards at a celebration dinner.

Employee ownership is turning the tide on the traditional model of a ‘face’ at the top of a business who has done very well out of it while not adequately rewarding the employees who helped get them there.

The best-known model for this in the UK at present is, as I’ve said, John Lewis, which is the largest employee-owned business in Britain and has 80,000 “partners” — employees who all own a stake in the business and therefore have a vested interest in its success.

John Lewis has struggled financially in recent years due to a rapid expansion between 2010 and 2015 that was then compromised by challenges in the UK’s economy and difficulties competing with the widespread shift to online shopping, but experts have cited the value of the partnership model in the company’s robustness during this period.

Retail guru Mary Portas warned the company not to be tempted to dilute its EO structure, describing it as its “heart and soul”.

I established my own accountancy firm, Maslins, in 2009 and opted to exit via an employee ownership trust. I transferred most of the company’s shares to that trust.

As the business I’d created became more and more successful, I felt increasingly guilty about my entitlement to the profits, while the people who had helped me make the business a success remained purely on a salary. It felt like an outdated model and this in itself contributed to me starting to feel less connected to the business.

When I heard about EO, I realised it was a brilliant way to allow me to step away whilst also rewarding the team who had helped make the company a success.

The Employee Ownership Association states that companies structured this way not only tend to treat their employees more equally, but are actually also “more successful, competitive, profitable and sustainable.” They also tend to have a stronger commitment to corporate social responsibility and positive involvement in the communities where they are located.

For me, getting a decent payout whilst leaving the business to those who helped me  build it, was the ethical way to step away.

By Chris Maslin, the founder of Go EO. Chris exited his own accountancy business in 2021 using an employee ownership trust and, having been through the process, realised he could simplify it and make it far easier and more cost effective for other business owners. For more information visit https://goeo.uk