The ESOP Association

5 BUSINESS VIEW MAGAZINE VOLUME 10, ISSUE 2 years, is what we have come to call ‘the silver tsunami,’ which is the retirement of Baby Boomers,” Bonham continues. “There are currently projected to be about 2.5 million business owners over the next ten years who are scheduled to retire -- 65% of those business owners have no succession plan (we have stats here from high 50s to low 80s). We have taken what we know of the existing universe of employee-owned businesses and modeled those onto that population and it comes up just short of 300,000 businesses that look just like the demographics of the existing employee-owned businesses in terms of the industries that are represented, the market cap, the number of employees, the locations.” “So, we think those 300,000 businesses are very ripe opportunities to be converted into an employee-owned businesses. On top of that, Congress is focused on providing even more incentives for business owners to sell to their employees through an ESOP and to provide better regulatory clarity and simplicity to make it easier to form, set up, and operate an ESOP. All of those factors point to a real opportunity for growth in employee ownership over the next ten years,” Bonham further illustrates. Indeed, according to Bonham, the political machinery in Washington has recently sped up. “We’ve probably seen more pro-ESOP initiatives in the last 18 months than we’ve seen in the last decade,” he reports. For example, the SECURE Act 2.0 was just signed into law on Dec. 29, 2022, providing businesses and their employees with added incentives related to their retirement plans. The Act also extends certain tax advantages to S Corporations that initially only applied to C Corporations. “Congress is finally beginning to level the playing field between C and S Corporations,” says Bonham. “That’s another very strong indication that Congress is taking a lot of affirmative the business isn’t going to get a huge benefit out of employee ownership,” he states. “But if the employees really understand that their contributions on a day-to-day basis add up and that it ultimately benefits them because the value of their ownership stake goes up, those companies will run circles around non-employee-owned businesses,” he outlines. “We see it over and over again in terms of the bottom line profitability, the rate of growth, and the disposition of the employees towards their jobs. And ESOP companies have a much, much lower turnover rate compared to any other type of business.” “The culture is better so people enjoy working there and they feel more respected and connected to their jobs because they have a financial stake in them. Imagine if you had a restaurant and every person waiting on tables was an owner of that restaurant – the quality of service goes through the roof. So culture is a huge benefit of having an ESOP. If done right, the employees do begin to treat the business as their own,” Bonham explains. “Now, what’s interesting over the next ten Ali-Jamshidi VP of Finance & CFO, CTL Engineering, Inc.