I enjoyed reading about Julian Richer, owner of Richer Sounds, placing 60 per cent of his shares in Richer Sounds in an employee ownership trust. I think it’s a hugely enlightened approach.
He explained that his decision to do so was partly to thank his loyal, hardworking colleagues. Members of staff will receive a payout based on their length of service. Richer also explained that setting up the trust ensures that the business retains its current ethos by deterring outside investors and preserves the “rather unusual culture”.
But, crucially, it was also about succession. Richer is 60 and wants to ensure a smooth transition of the business to the “next generation”. He believes the business is “far more likely to flourish” under the part-ownership of his colleagues in the future. Something that Richer omitted to mention is that, in having a stake in the business, colleagues will be incentivised to actively assist the business in flourishing.
There are a number of ways in which businesses, large or small, can reward and incentivise employees while planning for succession. These range from gifting equity to employees, through placing shares in a trust, to setting up a scheme in which, once certain performance targets are met, employees opt to receive equity in the business.
You may, like Julian Richer, decide that selling your business isn’t the right approach for you or your business. Instead, there are other ways to plan for succession, which can involve both incentivising and rewarding staff while ensuring that the ethos of the business endures.