ESOPs: A Savvy Succession Planning Alternative For Family Businesses

Why a growing number of family business owners are turning to employee ownership to solve their toughest succession challenges

Passing a family business to the next generation ranks among the hardest decisions an owner will ever face. There is no single solution, and the statistics on family business survival across generations are sobering. So what happens when the next generation isn't ready, isn't willing, or isn't able to take the reins?

Brian D. Bornino, CPA/ABV, CFA, recently explored this question in an article published by the Conway Center for Family Business. His answer points to a tool that many owners overlook: the Employee Stock Ownership Plan (ESOP).

What Bornino Covers

Employee Stock Ownership Plans have grown steadily in popularity, and Bornino highlights a notable trend:  more owners of family-owned businesses are evaluating ESOPs as an ownership transition tool. His article walks through five of the most common succession hurdles family businesses encounter and explains how an ESOP can address each one.

Five Succession Challenges An ESOP Can Solve

Bornino structures his article around the practical problems owners wrestle with. Here is a high-level look at the ground he covers:

• Preserving the family legacy. Many owners resist selling to a larger acquirer or private equity firm out of concern for the company's culture, reputation, and standing in the community. Bornino explains how an ESOP keeps the company name, leadership and operations intact, so very little changes except ownership.
• Maintaining family control. One of the most misunderstood advantages of ESOPs, according to Bornino, is that the family can retain full operational and strategic control even after selling 100% of the shares.
• Monetizing the owner's investment. For most families, the business is their single largest asset. Bornino describes how an ESOP lets owners receive fair market value and diversify their wealth while staying active in the company.
• Simplifying estate planning. Converting an illiquid business interest into cash makes it far easier to equalize inheritances among children who are active in the business and those who are not.
• Addressing a gap in next-generation leadership. When no family member is ready to lead, Bornino notes that an ESOP offers a gradual transition that also rewards long-tenured, non-family employees who have helped build the company.

Why This Matters For Ohio Family Business Owners

The thread running through Bornino's article is choice. An ESOP gives owners a way to monetize decades of work without surrendering the culture, control, and legacy they have spent a lifetime building. For families weighing whether to sell, transfer, or restructure, it is an option worth understanding before any decision is final.

Read The Full Article

Bornino's complete piece offers a deeper look at how each of these solutions works in practice. You can read the full article on the Conway Center for Family Business website. You can also check out GBQ's ESOP advisory service to learn more about how our team empowers family businesses to achieve their goals.

GBQ is a nationally recognized authority on ESOPs, supporting the growth of more than 100 ESOP companies annually with expertise spanning feasibility studies, formations, transactions, and valuations. If you would like to explore whether an ESOP fits your succession goals, reach out to Brian Bornino at bbornino@gbq.com or (614) 307-4388, or contact our team for a deeper conversation about your situation.