21 Hats Podcast Straight Talk About ESOPs and Co-Ops and EOTs, Oh My!
Why Worker Co-Ops Could Be the Future of Business Succession
Worker co-ops offer a compelling alternative to private equity sales, allowing business owners to sell to their employees and preserve company culture and mission.
John Abrams shares how converting his company to a worker co-op created a thriving, engaged workforce that values ownership without sacrificing strong leadership or clear decision-making structures.
Unlike ESOPs, which can be costly, complex, and primarily function as retirement plans, worker co-ops require less oversight and allow employees to share profits annually, not just at retirement.
This model can be financed by owner-financing over several years, sometimes supplemented with specialized nonprofit lenders, providing a practical path for succession that aligns with the owner's values and secures the company's future.
Jay Goltz, initially skeptical, recognizes the potential of co-ops after learning how they operate without the pitfalls he encountered investigating ESOPs.
John Abrams' Worker Co-op Journey
- John Abrams converted South Mountain into a worker co-op in response to employees wanting a greater stake in their careers.
- The company grew from $1.5 million to over $20 million in revenue, thriving under this model for 40 years.
Worker Co-ops Need Leadership
- Worker co-ops do not operate by voting on everything; leadership remains crucial.
- Clear division between management decisions and owner policy decisions makes the model viable.
