In the world of employee ownership, there’s a significant yet often overlooked segment of businesses: companies that are seen by advisors as too small to benefit from the traditional Employee Stock Ownership Plan (ESOP) structure. These small businesses—often family-owned or closely-held—represent what is sometimes called the “neglected niche.” For business advisors, this niche is an untapped opportunity to offer meaningful solutions that can benefit business owners, their employees and business advisors.

Low-hanging fruit

When business owners and their advisors think about employee ownership, ESOPs may come to mind as a go-to option. However, for many small businesses, the administrative costs and complexities of ESOPs are simply too high. This leads to a gap in solutions, where advisors might overlook the opportunity to recommend other forms of employee ownership that are much better suited for these smaller enterprises.

Business advisors who are knowledgeable about alternative models—such as worker cooperatives or Employee Ownership Trusts (EOTs)—can provide invaluable guidance to their clients. This is low-hanging fruit for advisors: businesses that are ripe for a transition but are unaware of options beyond the ESOP.

By expanding their expertise into these other employee ownership models, advisors can offer their clients a broader set of solutions, ensuring smoother ownership transitions while helping employees become more invested in the business’s future.

Worker cooperatives and EOTs

Worker cooperatives and Employee Ownership Trusts are powerful alternatives that don’t carry the same costs or complexity as ESOPs. They can be especially appealing for small businesses looking for an affordable and sustainable path to employee ownership.

• Worker cooperatives: In a worker cooperative, the business is owned and managed by its employees. Each employee has an equal share of ownership and a voice in the company’s direction. This model is particularly effective in smaller companies with a tight-knit workforce.
• Employee Ownership Trusts (EOTs): An EOT is a legal structure that holds shares on behalf of employees, providing a flexible and enduring form of employee ownership. It allows business owners to gradually transition ownership, giving employees a stake in the company without the need for large upfront investments.

For business advisors, these alternatives represent an incredible opportunity to serve small business owners more effectively. By guiding their clients through these options, advisors can help them achieve successful transitions while offering employees greater job security and engagement in the business.

Seizing the opportunity

At Project Equity, we know that business advisors are key to unlocking the potential of employee ownership for small businesses. That’s why we offer specialized, accredited employee ownership training for business advisors. Our training equips advisors with the knowledge and tools to confidently recommend a variety of employee ownership models, including worker cooperatives and EOTs.

By broadening your expertise in employee ownership, you can offer your clients a wider range of solutions, improve your advisory services and tap into a growing demand for employee ownership transitions. Don’t miss out on this overlooked market—there’s real potential for your business and your clients.

Ready to unlock this neglected niche? Learn more about our employee ownership training and start offering your clients the full spectrum of ownership transition solutions.