Loading summary
Transcript2 lines
- [00:01]
A
Welcome back to the Business of Beers podcast. Your daily dose of strategies, tools and tips to help you build an eight figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.
- [00:17]
B
What are my thoughts on employee. On employee ownership for improving work culture? Yeah, I think it's, I think it's a. It's, it's, it's good. I mean, what. There's a couple different ways this can be done in actual execution. The easiest way is you do it through what are called some sort of profit sharing plan where you basically have a percentage of the company or the store's profits that is then shared with either the manager or the team or however you design it. We do have a plan like this for some of our managers are on this pay plan where there's a set percentage of their store's profits that they get instead of the other plans. For some people, it has huge impact, right? They really get into more of the numbers. They really start to understand the money coming in and the expenses and this and that. For other people we've had on in the past, it was too stressful, like, because, you know, there might be a month where, I don't know, a tree has to get trimmed that's about to fall in the store. It costs $4,000 to take this giant tree down and like that $4,000 gets charged to the P and L, right. And so now their pay is affected because, you know, it's an expense and it gets, you know, it gets, it's. They want to pay a piece of the profit, the upside. They also get paid, you know, when we have expenses, right. So for some people, they didn't like that component of it and they wanted something simpler. So I think sometimes it can be really good. I think sometimes it can be a little stressful. But that's like the ups and downs that every owner goes through, there's actual ownership, right. So you get somebody who actually gets. So that's like some sort of pay plan, right? So you could do some sort of like profit sharing pay plan or profit driven plan. Another level, and there's like a million levels. Like, I'm not. This is, this is the only ones I'm going to talk about here. But like there's a million different ways you can slice and dice it. You would want to keep it as simple as you can. But yeah, there's ones where people get what's called phantom equity. So it's not real equity, but it's like phantom. And that's, it's like similar in that, you know, they get interest in the profits but they probably don't have any voting rights. Right, but there's like some, and, and that there's potentially buyback as well in, in, in a phantom based plan there where so someone like says hey, you get like whatever 5% of these phantom shares and you know, you work for so long and then when you leave like we buy them back and they're like some predetermined thing but it's, but it's really just like numbers on a spreadsheet. Like it's nothing's, nothing's official in terms of any of the like official documents. Then you would have like, you know, like a real equity plan. Now a real equity plan means that like in most of these things, you know, they're going to become potentially a shareholder where or, or if it's, I don't get too complicated but like if it's an llc, they're called member, it's called membership units. But so, so now they're somebody who, who gets like, you know, it's like official, like they are a shareholder of the company. They have actual real equity in the business. Maybe those shares are given to them as part of their compensation. Maybe they buy in. Maybe it's like, hey, the company's worth, you know, $1 million and you're going to put in $10,000 and you're gonna get 1 1% or whatever, right? And then those shares could grow in value. It's possible. Then when they leave, they get bought back or it's possible the shares can be passed to somebody else. It all depends on what your rules are. They're gonna get a tax return, they're gonna get a K1. It's pretty serious. You generally don't wanna do this unless you have people who are like you're ready to marry. Essentially. This is pretty serious. Someone's got equity in the business. It's not something that you're going to take lightly. You're probably going to do it only for the people who are at the top level. Like the C suite in our example. That's the level that we would start having these conversations with. There's another version, it's called an esop, which stands for employee stock ownership Plan. That's like a whole thing, but it's a way that an owner could sell his company and his employees buy it with the help of a bank. Simplest way to think about it. So for example, let's say I wanted to sell my company and I didn't want to sell it to private equity for whatever reason. Maybe I decided that I was afraid that they would, whatever, rip it apart. I would, I was afraid of certain things. Or nobody wanted to buy it. Like, no private equity company wanted to buy it. Maybe I couldn't do it, whatever. Like, but, but. So another option, and I've seen a number of franchisees, large franchisees do this, is they create an esop. And an ESOP works is like, you get a valuation on the company, they can go to the bank. The bank can then basically say, I could sell my company for $10 million or something as an ESOP. They could potentially go to the bank, probably get a loan for like, I don't know, 8, $7 million or something like that. I would do a seller carry for 3 million, right? So like, technically, I'm out of it. The employees now all the shares are basically owned by the employees. The ESOP doesn't pay taxes, has no federal tax return. So 30% of what we make goes to taxes because they don't have that 30% tax expense. They have more cash flow, which then can be used to accelerate payments back to the bank. So the bank's comfortable with it. Then at a certain point, once the bank is paid back and all the debt's paid back, then the, all those future distributions get accrued in employees like retirement plan. And then when they retire or quit or whatever, their shares are bought back with that, with that money. And so it's not like a cash flow plan, but it's more of like a retirement plan. And so does it work? I mean, I've seen ESOPs work. I mean, I've seen some of them work really well because people, like, people realized, like, you know, hey, if I, you know, I, you know, it's a long payoff. So, like, people really have to have the right mindset here. But I mean, I've seen multiple ESOPs people double the, double their value over time because of, because of everybody getting on board. So anyway, I think, I think it can work. I think a lot of it, though, in terms of, like, does employee ownership work for improving culture? It really comes down to, like, the owners and their ability to communicate and educate. And like, a lot of people have never seen a P and L. They have no idea, like, sales and cost of goods and payroll and margins and variable costs and fixed costs. And like, there's so much that goes into it that unless you're committed to educating everybody on it and how it works and the different levers that we can pull and, like, what you can actually do to effect change, then, then the behavior is going to be the same, which is they're going to get the pnl, they're going to scroll to the bottom, they're going to see what the number is, they're going to multiply it by whatever, and then they're going to be like, oh, did I make money or not? But to really impact change, you have to have somebody who thinks about the whole thing and what they can do.