Employee Ownership: A Key to Success?

The Colorado Employee Ownership Office will soon open another round of grant funding of $3,000 to businesses converting to an employee ownership business structure. This may seem surprising, but the movement of businesses converting to employee ownership is increasing every day in Colorado. Employee ownership isn’t just about numbers and contracts, it’s about choosing a business model that brings out the best in its employees and leadership. The reason it is on the rise in Colorado is because Colorado and employee ownership have a lot in common--collaboration, accountability and strong work ethic.

What is employee ownership? 

Employee ownership is often misunderstood due to specific definitions of what it must look like or confusion around employee ownership models. In Colorado, employee ownership encompasses many different business models, depending on the needs of the individual business. A Colorado Employee Owned Company can be any company offering an ownership stake to at least 20% of its employees. Rather than setting strict rules as to what businesses may be considered “employee-owned,” we encourage business owners to research and consider all of the employee ownership structures. 

What is the conversion process?

Converting to a Colorado Employee Owned Company is relatively painless. The process requires service professionals such as valuators, lawyers and certified public accountants to manage all technical aspects of the conversion. The model of employee ownership that is the right fit for your business depends on the number of employees, goals of the conversion, budget and other factors. 

To convert to a stock option or other Colorado Employee Owned Company structure is often low-cost and low-energy. The entire conversion could even be done in a matter of a few months. The Employee Ownership Office knows that every company has a unique culture and history that affects the business model they choose. Therefore, the Employee Ownership Office encourages businesses to consider the “in between” options of employee ownership that are represented in Colorado Employee Owned Company models: stock options, profits interest, phantom stock, stock appreciation rights, restricted stock and more. 

Why choose employee ownership?

Succession planning

One of the most common reasons business owners gravitate toward employee ownership conversion is to make a plan for when they retire. Many business owners spend their lives dedicated to building up their business and setting it up for success, but what happens when they leave? Employee ownership offers a built-in succession plan that ensures a business owner has passed on their legacy to the same people that helped them build it. 

Engaged workforce

Another invaluable benefit of employee ownership is a natural motivation for employees. With an employee ownership structure in place, employees often feel a stronger desire to perform, generate ideas and be an active participant in the company. Not only do they have a monetary investment they can build, but employee owners have a voice at the company that makes them feel motivated to advance the company every single day. 

Your bottom line

Many business owners may have heard of “attract, retain, engage,” or perhaps, they live by it. This phrase is often used to describe the ways to bring in and keep employees. Employee ownership business structures may attract new employees, but they are proven to retain and engage a workforce. Retention is often higher for employee-owned companies because the workforce is engaged every day and inspired to collaborate in the success of the business. 

Take the next step

To learn more about employee ownership and explore your options, contact our employee ownership expert. He can answer questions you may have about becoming an employee-owned company and connect you to vetted technical service providers for initial guidance.

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