Massive layoffs, record applications for unemployment, “Closed” signs displayed on businesses we love most.  All are commonplace in today’s pandemic world.

All businesses are impacted by this pandemic. ESOP companies show more success in dealing with it.  Recent research from Rutgers University proves this.

At ESOP owned companies, the median job loss was 4 percent.  For all other firms, it was 13 percent.  At all companies deemed essential, ESOPs laid off staff at only one-fourth the rate of other essential companies.  Among those companies deemed non-essential, ESOP companies laid off employees at a rate 2.77 times lower than the non-ESOP company.

For those of us in the ESOP world, these statistics are not surprising at all.  Similar statistics are reported for the recession that began in 2008.  In 2010, 12.1 percent of private-sector employees reported being laid off. For those who worked in ESOP companies, only 2.6 percent were laid off.

While layoffs are a major concern, this pandemic recession carries the additional worry about personal safety. It is estimated that 98.3 percent of ESOP companies took protective measures for their workers. Only 88.9 percent of firms overall took these measures.

Though there are fewer ESOP owned companies than non-ESOP owned companies, this data still should be considered conclusive.  According to the National Center for Employee Ownership (NCEO), the 6,000 ESOP companies in the United States hold assets over $1.4 trillion.

How do ESOP companies beat the norm?

At an ESOP company, because they have skin in the game, employees have a sense of unity.  Their ownership gives them an extra incentive to work towards the company’s growth and success.  ESOP employees are more likely to come up with those outside-of-the-box ideas a company needs to thrive during these challenging times.

As the ESOP company grows in value, so does an employee’s personal wealth.

Is an ESOP right for you?

Increasingly, business owners facing retirement turn to ESOPs as all or part of their succession plan. ESOPs keep an established company intact.  The business continues to run with its current management. Often when a company is sold, the new owners change the way business is conducted. This can be disastrous and may lead to losing key clients and key employees. The seamless transition ESOPs offer eliminates those concerns.

ESOPs can be a great option many business owners don’t know about. But ESOPs are not for everybody. Contact JBV Business Valuation today to see if an ESOP is right for you.