A couple of months ago, Ovation Finance chairman Chris Budd took to the road with Illuminate Live to discuss how he transitioned his business to an Employee Ownership Trust model (EOT), and how EOTs work in practice.
His book, The Eternal Business, sets out the process of moving to an EOT in more detail. Chris has now built on the information from the book to create an online platform to help companies consider this model and plan for succession. Here, he sets out how the programme works.
The trouble with succession
In my experience, one of the biggest issues that keeps business owners awake at night is how they are going to exit. As with so many big issues, the response is often not to think about it at all.
Dealing with succession planning many years before it becomes necessary is standard business advice. Yet the world is littered with business owners who left it too late and had to face an unsatisfactory exit.
For me, the two traditional options of either selling to a consolidator or going through a management buyout didn't give me what I wanted.
I was looking for a solution that would allow my business, Ovation, to carry on; allow employees to take control; allow employees to benefit from profit; ensure clients continued to be looked after to our high standards; and release the value in the business for me. In short, I wanted my cake and I wanted to eat it.
The EOT provided that solution. By establishing the Ovation EOT and then selling to it a majority shareholding, I was able to ensure a legacy of my business, and yet still get paid at a value determined by an independent market valuation. It seemed both generous and selfish at the same time.
Like almost every sale of every business, my earnout comes from future profits. It's why I spent many years making changes to the business with the aim of making myself the least important person in it. Only when I felt the employees were already successfully running the business without me being there did I feel able to complete the sale to the EOT.
The eternal business
During this process, and through working with other firms, I have developed a model for how to build a business which is intended not to be sold, but to be owned by an EOT. To build a business that will last if not forever, then at least long enough to complete my earnout!
I wrote the book The Eternal Business to help others explore whether this route might work for them. However, having spoken with so many owners, not to mention employees, since the sale of Ovation I've realised while the book was an worthwhile entry point, I needed to provide a more proactive route if I was going to reach everyone who is interested.
This is where The Eternal Business Programme comes in. It's an online tool designed to provide a complete pathway for companies who want to prepare for the day when the current owners move on and the next generation takes over.
An EOT-owned business does not look like a privately owned business. There are significant changes required, both for owner and employees, and it's for this reason the transition can take considerable time, often years.
The programme will help owners thinking about their succession plan work out if the EOT might one day be right for them, and then show them how to get there. Starting this process of planning for succession a few years before it becomes necessary can ensure a happy end to your entrepreneurial story.
About the programme
The Eternal Business Programme is comprised of three courses.
Course 1: Is an EOT actually right for me? Made up of eight modules and 60 individual lessons including articles, activities, videos and quizzes. The course culminates in an engagement plan in order to share the news with the leadership team.
Course 2: Decision-making for the leadership team and owner, and preparing the business for transition
Course 3: Paving the way for company-wide changes ahead of the sale
The programme costs £300 a month, or £575 a month for the cohort version, which includes a quarterly facilitated day with the other companies in your cohort.
To sign up to the programme, click here and use the code 'Nucleus' to get a free copy of Chris's book The Eternal Business. The first five people to sign up to the programme using the code 'Nucleus' will also get a free 90-minute consultancy session with him, either in person or via video call.