Business

Leverage Employee Ownership as a Powerful Tool for Contractors

Transitioning to employee ownership can help businesses and communities thrive for generations to come.
By Alison Lingane
March 1, 2022
Topics
Business

Businesses in the commercial construction industry take many forms, but every business owner shares the desire to increase profitability, motivate and retain employees, generate capital for growth and secure owner retirement.

Those were the goals of owner Craig Danley, who owns a utilities and construction company founded in 1991.

From the start, Danley frequently shared profits with employees as a way for them to participate in the success of the growing construction company. As time went on, Danley wanted to continue to reward his employees while protecting his legacy, and ensuring the company remained a vibrant part of the community.

After 25 years in business, Danley discovered the most powerful tool in his business toolbox: employee ownership. The company became employee-owned in 2017.

“With employee ownership, you get to be better,” Danley says. “You get to grow. And it’s not only about your retirement. It’s about what happens to you while you’re building a company as an owner. It changes the way you actually interact with your colleagues, your family, your supervisor and your community. It’s an incredible experience.”

Advantages of EO

Employee ownership has given the company important advantages over other businesses that are not employee-owned. Most notably, when the company makes a new hire, it is hiring future owners who see the company as a career and a lifestyle to invest in rather than merely as a job.

Additionally, some employee ownership models have tax advantages. For his company, Danley elected to create an Employee Stock Ownership Plan, through which the qualified retirement plan transfers all or part of the company’s shares to a trust, administered on behalf of the employees. In this case, one financial benefit to his company’s employee ownership transition is not having to pay federal taxes—a meaningful cost savings for any business in any industry.

ESOPs are just one model of employee ownership. Other EO models that business owners can consider include worker-owned cooperatives—which have traditional management structures with employees holding some board seats and sharing profits based on hours worked—and Employee Ownership Trusts, a blending of the trust structure with some of the democratic qualities of the worker-owned cooperatives.

Where to Begin

As a powerful business tool, EO unlocks countless opportunities for owners to sustain their companies, empower their workers and strengthen their communities.

The construction industry is all about building. With EO as a tool, construction business owners can build the following characteristics for their own companies.

  • A home for good jobs and loyal workers: Employee ownership transitions take care of the people who have worked hard to help build the business.
  • A stronger community: Local businesses play a critical role in their communities. Employee ownership keeps the business anchored in place, and extends the investment in that community, as more people share in the ownership.
  • A protected legacy: A strong mission guides many businesses. Whether it is a passion for quality or a triple bottom line, who better to carry it on than the people who helped realize the mission?

Transitioning to employee ownership can help businesses and communities thrive for generations to come.

“If you’re an owner, and you do not have a succession plan yet, it’s never too early to start,” Danley says. “It’s a big bet to think that somebody’s just going to outright buy what we created; employee ownership lets me plan for the future without that risk.”

by Alison Lingane
Alison Lingane is co-founder of the nonprofit Project Equity, a national leader in the movement to harness employee ownership to maintain thriving local business communities, honor selling owners’ legacies, and address income and wealth inequality. Project Equity raises awareness about employee ownership as an exit strategy for business owners, and as an important approach for increasing employee engagement. Project Equity also provides hands-on consulting and support to companies that want to transition to employee ownership, starting with free consultations to discuss business owner goals.

Lingane is also a founding partner of EO Equals, a campaign designed to expand the employee ownership movement and help more small businesses thrive, empower workers with higher quality jobs, and build more equitable communities.

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