Employee Ownership Trusts (EOT) are a tried and tested way of rewarding staff, protecting and preserving a beloved brand, and attracting and retaining the best quality staff, so it stands to reason that savvy entrepreneurs are considering it as a business model.
Founders of tech firms, in particular, have long been attuned to the need to structure their business well, and to have a detailed end goal in mind right from the start. Very often a tech founder will have a plan in place for succession in the very early days of founding the business, since selling a tech product to one of the big hitters in the industry can be lucrative and can free up an entrepreneur to move on to the next product on the drawing board.
Giving equity to employees is a great way to attract top talent in the early days, particularly when cash is scarce. This can be one of the ways start-ups can compete with high corporate salaries, and the EOT business model is undoubtedly one that young potential employees are aware of and interested in. So, the EOT model fits well with start-ups.
Companies raising early stage funding often set aside around 10 percent of their total company equity for their employee option scheme. This amount is then likely to rise when the company progresses through later funding rounds. So, should a company founder offer their whole team Employee Ownership options or only some staff members?
Clearly, offering the whole team the chance of Employee Ownership means every recruit is invested in your business, so this sets your firm on a very good footing as far as your company ethos is concerned. Or, you might want to be selective, by only giving options to key appointees to incentivise them to join and to stay with the business. Or, you could do both – give everyone an entry-level value of options when they join the firm, then offer further to the key performers as a reward.
Whatever EOT route you decide to take, the Employee Ownership Wales team is on hand to offer free, expert advice, from initial enquiry to the very end of the process.
If you are a food business and you’d like to find out more about your succession options, join us on the 23rd February for our free webinar: