More U.S. business owners nearing retirement now sell companies to employees instead of outsiders . Tricia Salcido of Softstar Shoes in Oregon did just that, transferring ownership to her 30 employees this year. At 56,Salcido plans her retirement but stays on as chief financial officer, hoping to steer her team through this change.
Since the sale,Salcido's seen employee engagement jump. She gets many suggestions from staff on how to improve things,input that was rare before. “I’m getting personal emails from employees saying,‘Well,have you thought about this idea?’” she remarked, showing newfound enthusiasm among her workers.
This trend of employee ownership is spreading in U.S. A study predicts up to 600 firms may be sold to employees yearly by 2025. Investment funds backing these deals surged 78% to $865 million in 2023 from $500 million in 2024. Business owners increasingly prioritize employee welfare and community impact.
Salcido wanted to keep jobs and the artisanal quality of her business, fearing corporate buyers would slash costs. “It’s something you put your life’s work into… most small business owners really care,” she said.
Many U.S. entrepreneurs face similar choices as retirement looms. A McKinsey report says about six million small and medium-sized business owners from baby boomer generation will retire by 2035. This "silver tsunami" is causing a wave of ownership changes.
Ethan Rouen from Harvard Business School often meets owners looking to sell . Their kids aren't interested in taking over,so they consider employee ownership . Rouen and colleagues argue this model preserves businesses and boosts employee responsibility.
William Stockwell sold his Philadelphia company, Stockwell Elastomerics, to employees too. Founded by his great-grandfather in 1919, he wanted it to stay intact . Stockwell saw downsides of outside ownership — relocation or major changes. “The new ownership might move the business, they might shut it down,or drastically change it in other ways,” he explained .
Employee ownership can take different forms. At Softstar Shoes,an Employee Ownership Trust (EOT) managed the transition, easing financial burden on employees. They don't buy business outright; the trust pays former owner from future profits, risky for seller.
Stockwell chose an Employee Stock Ownership Plan (ESOP), giving employees shares they cash in only when leaving. Popular in U.S.,with 6,609 companies and 10.9 million workers under such plans in 2023. Total assets top $2 trillion.
Employee ownership is appealing but setting up EOTs,ESOPs is complex. Many owners don't know these options exist, as Salcido noted, “No one’s heard of them.”
In central Pennsylvania,Paul Silvis is selling his SilkoTek Corporation to employees. At 71,he's confident in decision. “I’m getting ready to ride off into the sunset at some point,” he said,thinking of retirement.
Experts say plan early for this transition. Stockwell warns against starting in retirement year . But political support is growing in Washington to simplify employee ownership. Department of Labor launched an Employee Ownership Initiative to promote these transitions, possibly boosting success in coming years…
