In an increasingly competitive business world a key challenge (perhaps the biggest challenge) for you as a business owner is how to recruit, retain and motivate your key team members.  These are the members of your team who are going to help you really grow your business.

You can be sure that these A team members will be aware of their value.  Your competitors and the head hunters will be calling them on a regular basis to see if they would like to join them.

How to motivate the best

You may think that you can motivate the team adequately through cash bonuses.  You may have gone a step beyond that and have given your team a share of your business. That share of the equity is likely to have been designed to allow the team to share in the proceeds of sale when you sell your business.

Framing the share incentive in this way may though not resonate with the brightest and best of your team.  Will they perhaps think that they want to set up their own business?  The thought that you are to decide when and how control passes to a third party buyer may be something that worries them.

Statistics show that over 65% of business sales are unsuccessful.  Culture clashes are often the biggest challenges to a successful takeover or merger.

Your Distinctive Culture

Almost by definition a very successful business will have its own distinctive culture.  Those who have been inspired by your leadership style and culture may embrace that more fully than even you as the founder of your company.

Aligning the Interests of key team members

For the enlightened business owner selling to their key management team, and allowing them to pay out of the future cash flow, can be a powerful way to grow value.

The interests of you and your team will be fully aligned.  It is not an us and them: founders and employees.  But rather all key people thinking and acting like business owners as everyone works together to grow the business.

V-FMBO as a stepping stone

If you are able to attract, retain and motivate the very best people for your business selling to your team may give the best outcome for you and them. You may retain a significant minority shareholding yourself. That gives you the opportunity to use the V-FMBO as a stepping stone to build value for you: this time as an investor rather than as a business owner and operator.

The next cycle of growth could be achieved by a sale by you and your team to a trade or a financial buyer. It might even be that there is a cycle of vendor funded buy-out followed by another vendor funded buy-out.

The world increasingly requires collaboration and, as it becomes more complex, more collaboration will be needed.  The biggest and most successful professional services firms have an expectation of co-ownership by succeeding generations of practitioners.

Succession models that embrace collegiate ownership perhaps have a lot to teach us.

For further information, please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 or email everyman@everymanlegal.com