Is Your Business Ready for Employee Ownership? Find Out for Free

You've built something meaningful. Your business serves customers, provides livelihoods for your team, and generates real value. But now, you're thinking about the future. Maybe you're ready to step back, or you want your employees to have a genuine stake in the company's success. You've heard about employee ownership, but you have questions: What would employee ownership look like at my business?

Why Employee Ownership?

Employee ownership is a proven model. It increases employee engagement, improves retention, and creates real wealth for people who've invested their careers in your company. Studies show employee-owned businesses are more profitable and more resilient.

But not every business transition is the same. A successful employee ownership transition depends on several factors: your company's financial health, market position, growth trajectory, and which ownership structure makes sense for your situation. Getting clarity on these questions before you make major decisions can save you months of uncertainty (and cost).

That's where a feasibility analysis comes in.

What Is an Employee Ownership Feasibility Analysis?

A feasibility analysis is a straightforward assessment of whether employee ownership is viable for your specific business, and if so, what it would look like.

A solid analysis examines:

Financial viability. Can your business generate enough cash flow to support employee ownership? How much of the business you convert to EO (yes, partial employee ownership transactions are possible), how much the business is worth, and how profitable it is, all impact the feasibility of an employee ownership exit or transition. For example, some common limitations on debt financing for a EO transition are:
- Leverage ratio under 4
- DSCR over 1.3
- Some of this can be overcome with seller financing, but if you want a market rate liquidity event, working with an EO focused equity partner can help close the gap.

Ownership structure options. If you Google "How to make my business employee owned," you'll find a lot of information on ESOPs, the oldest structure of formalized EO in the US. ESOPs are great, but they are expensive to set up and maintain. If you are too small to afford an ESOP, you can still transition or exit your business to employee ownership. Small businesses may be better suited to EOTs or cooperative models. The analysis helps you understand which structures make sense for you. (See our article on ESOP versus coop versus EOT, etc.)

Employee impact. Employee ownership is an amazing tool that can help owners gain liquidity while strategically improving their business. But it's a lot of work if it's only going to provide a few hundred dollars of increased income to employees each year. An analysis should show what's the upside for you and your employees.    

Timeline and complexity. What would actually be involved? How long would it take? What needs to happen first? The analysis demystifies the process so you're not walking in blind.

Next steps. If employee ownership is viable, what does the path forward actually look like? What do you need to do now, and what comes later?

Why Now?

The longer you have before your intended transition date, the more flexibility and options you have. A feasibility analysis gives you that clarity early so you can make intentional decisions rather than rushed ones.

If you're concerned about retention or employee engagement, understanding employee ownership as an option is valuable. Your team might surprise you with their commitment when they have real ownership. Studies show that productivity increased by 5% in the first year post-employee ownership conversion. 

If you're weighing different succession strategies (selling to a private buyer, bringing in an external investor, passing the business to family, or transitioning to employees) the feasibility analysis helps you compare what's actually possible. It's one piece of information for a much bigger decision. (See our article on the benefits of selling to a private buyer and enabling employee ownership.)

What You Get From a Free Analysis

Small Capital offers a free employee ownership feasibility analysis designed specifically for your business. It's completely free and no-obligation. Our goal is to help business owners understand their options, and help more businesses convert to employee ownership.

The analysis provides:

• Multiple financial models that assess what an employee ownership exit or transition could look like in terms of:
  • Liquidity event
  • Employee incentive
  • Business cash flow
  • Debt capacity
• First-pass of enterprise valuation
• An overview of which ownership structures could work
• A realistic sense of timeline and complexity
• Concrete next steps if you want to move forward
• An understanding of how employee ownership might align with your other goals (succession, leadership transition, employee engagement)

No pressure. No fees attached. Just useful information for you to have in your back pocket.

Making an Informed Decision

In the past three months, we have provided the Free Employee Ownership Feasibility Analysis to dozens of small business owners. What we've heard from business owners is that the analysis gave them confidence in understanding their options, limitations, and 

Employee ownership can work at more businesses than we've been led to believe. Employees stay longer. They care more. They work with ownership mentality. The business is stronger. 

See what impact this could have on your business, whether it's time for you to exit, or you're looking for an enduring growth strategy.