Why small business owners are cashing out and employees buying in

There’s been a few changes recently at C-Mac Industries in Sydney.

There are charts in the lunch room so everyone can see how the business is doing and productivity at the metal fabrication plant is up 18%.

The driving force behind these changes was the decision of C-Mac’s owner that they wanted to exit the business.

Usually this means if a buyer can’t be found or there is no succession plan for another family member to take over, the business built up over so many years hard work has to be closed down.

This seemed inevitable at C-Mac as well because even though the business turns over $4 million a year it hardly made any profit.

There were no buyers on the horizon and no family succession plan.

But the business has survived and thrived through the introduction of an Employee Share Ownership Plan (ESOP).

All but two of C-Mac’s employees took up the option to earn equity and involvement in the business as well as an income.

Steve Grlyak, manufacturing manager for C-Mac, told SmartCompany the ESOP gave the business and its workers a new lease on life.

“There are lots of family businesses where the owners get sick or want to retire and they want to shut it unless there is a solution,” he says.

He says in these private companies many of the skills in the business are held by the owners, “so you keep losing the skill and the product is lost”.

The benefits of employee ownership

As the experience at C-Mac shows, ESOP can increase productivity and they can also help retain employees and lead to cost reductions.

CPA Australia policy adviser Gavan Ord told SmartCompany giving employees part or full ownership of a business can be particularly useful in helping to retain key employees.

“It also helps to ensure continuity in the business, which can help retain key suppliers and customers and add value to the business,” he says.

Employee ownership schemes can save you money in unexpected ways, according to Martin Nally, the managing director of consultancy HR Anywhere.

“When people feel like it’s their business, they’re much more careful around things like costs or their use of resources,” Nally told LeadingCompany recently.

“That’s what share schemes are aiming at – that sense of ownership.”

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