The Power of Employee Ownership for Business Brokers
- Zarin Kresge
Business brokers are on the front lines of one of the most important moments in a business owner’s journey: the sale. You’re trusted to bring qualified buyers, structure strong deals, and critically, to help owners realize the full value of what they’ve built.
But in a market where 70-80% of privately held businesses fail to sell according to an Exit Planning Institute study, having more options is crucial.
Broad-based employee ownership (EO)—where a company’s employees have a meaningful ownership stake in the business—is emerging as a viable path to sale.
For the right businesses, EO can deliver market value to the seller while preserving the company’s legacy, workforce, and culture. And for brokers, it creates an opportunity to expand your offering, not replacing what you do best, but adding another credible path to get deals done.
EO transactions still require many of the same core competencies brokers already bring to the table: valuation, deal structuring, and coordination across multiple parties. But they open the door to a different kind of buyer, one that’s already deeply familiar with the business.
So, where does EO fit within your practice, and how can it serve your clients alongside more traditional exits?
To explore that, I spoke with two advisors working on business sales and employee ownership: Colby Mayberry of Edward Jones, a frequent collaborator with brokers, and Hunter Arwood, a business broker and partner at Falco Sult.
The Benefits of Employee Ownership for Business Owners
“Business brokers need to have a general idea of all the various forms of exiting a business,” Colby explained. “If they want to maximize take-home sales, it might be the best option.”
“Employee ownership provides a unique path to exit for business owners,” Hunter said. “It’s a strong option that should be considered. With an EO transaction, an owner could receive market value in an exit.”
In addition to market value, business owners may be able to have tax advantages depending on the type of EO. For example, for larger businesses, Employee Stock Ownership Plans (ESOPs) offer tax-advantaged structures that can actually maximize the seller’s net proceeds compared to traditional sales. This is also true for worker cooperatives and smaller businesses.
Plus, EO gives business owners the ability to have more process control. “If [selling owners] are concerned about buyers making too many changes post-closing, a transaction with existing employees is more likely to preserve the seller’s vision for the company and the legacy they hope to leave behind,” Hunter stated.
Navigating the intricacies of an EO transaction requires a specific skill set—but we can help. Hunter and Colby break down these mechanics in our Employee Ownership for Business Brokers course.
If owners are concerned about buyers making too many changes post-closing, a transaction with existing employees is more likely to preserve the seller's vision for the company and the legacy they hope to leave behind.
What Business Brokers Should Know About EO
“An important aspect of EO transactions is having an appropriate counterparty to engage with throughout the transaction process,” Hunter said. “For example, in facilitating a sale to key employees or a management group, encouraging the purchasing employees to engage professional representation early on can be key to insulating the buyer and seller’s day-to-day working relationship from the ups and downs that come from negotiating transaction terms.”
He explained that for sales that include the entire staff of a business (based on eligibility in the plan and Employee Retirement Income Security Act, or ERISA, compliance), such as an ESOP buyout, it is required to have a trustee and an independent valuation.
“As a rule of thumb, smaller businesses with less than $750k of EBITDA typically aren’t good candidates for ESOPs specifically due to the administrative burden of compliance costs relative to total cash flow from the operations,” Hunter said. But ESOPs, though the most popular form of EO, aren’t the only options for businesses. Smaller companies can explore two alternative EO models suitable for businesses with more than 12 W2 employees:
Knowing that businesses with less than $750k EBITDA may not fit an ESOP—but might fit other EO models—is a nuance covered in the Employee Ownership for Business Brokers course.
How Knowing About EO Enhances a Business Advisor’s Work
“While not a business broker myself, it provides me with a background of knowledge in the field as we talk with business owners,” Colby said. “Knowing one part of the equation is helpful, but when you can combine it with cash management, retirement benefits planning, and an eventual exit—it can create a more cohesive approach. Not only to help unlock capital for the business owner more effectively, but to help a company’s continued competitiveness in it’s own business segment. The goal is to strengthen overall value so that all stakeholders can benefit.”
“The experience [as a business broker who knows about EO] is invaluable in my view,” Hunter said. “It provides another distinct option that business owners and prospective clients may not have previously considered. When key employees are already independently managing the business, it may not be necessary to seek out a qualified successor, given the potential internal buyers who already have experience in the business.”
Knowing one part of the equation is helpful, but when you can combine it with cash management, retirement benefits planning, and an eventual exit... the goal is to strengthen overall value so that all stakeholders can benefit.
Why EO Deserves a Place in Every Broker’s Toolkit
Employee ownership offers business brokers a powerful alternative when helping owners plan their exits. By understanding how employee ownership models work, brokers can present clients with an option that preserves company culture, rewards employees, and protects their legacy while still delivering market value.
For brokers willing to expand their knowledge, employee ownership can open new opportunities to better serve clients and differentiate their advisory services. As more business owners look for exit strategies that balance financial outcomes with long-term impact, EO stands out as a compelling path that benefits sellers, employees, and the communities where these businesses operate.
Why EO Deserves a Place in Every Broker’s Toolkit
Join Hunter and Colby to offer a third, powerful path to your practice. In our Employee Ownership for Business Brokers course, you will learn to:
- Identify EO-ready clients using EBITDA and cultural benchmarks
- Structure deals that protect your client’s legacy and your commission
- Earn 1.25 CPE credits while expanding your advisory credibility
FAQs
Understanding employee ownership offers business brokers an additional exit strategy for their clients. For the right businesses, employee ownership can deliver market value to the sellers while preserving the company’s legacy, workforce, and culture.
Business brokers can help evaluate whether employee ownership is a good fit, guide owners through exit planning, coordinate advisors on the buy and sell sides, and help structure the transaction during the transition process.
