How to sell ESOPs

An ESOP is:

An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. ESOPs give the sponsoring company—the selling shareholders —and participants various tax benefits, making them qualified plans, and are often used by employers as a corporate finance strategy to align the interests of their employees with those of their shareholders.

Target Buyers (Businesses)

1. U.S. legal entity that's not already an ESOP (only about 7,000 of the approximately 6,000,000 business in the U.S. are ESOPs as of 2023) 

2. Minimum $1,000,000 USD trailing 12 month EBITDA ($2,000,000 USD if the owners have hired a broker to help sell their business)

3. 15 or more employees (W2, or willing to convert to W2)

4. Assets much larger than debt on the balance sheet

5. Looking for, or open to, a liquidity event

6. The larger the better, since the post-sales-rep process takes a similar amount of time regardless of the size of the business

Questions that can help build rapport and spark curiosity with key decision makers about converting their business to an ESOP.

1. Who do you know who would like to sell 30% to 100% of their U.S. business in 90 days?
   At the highest valuation?  The fair market valuation for a business where the buyer keeps the employees instead of terminating many of them to save expenses.
   With significant cash upfront if they want it?
   At a much lower cost than selling through a business broker?
   Safeguarding the future of their employees, partners, and customers?
   Privately...without putting their business and investors at risk?

2. For what would they use the money from the sale?

3. Would they prefer that their employees keep their jobs after the sale?

4. Would they want to stay in the business, or retire?  

5. Would they prefer that their employees have some ownership after the sale?

Free Agent Sales Process

1. Confirm serious interest from a majority of the business' decision makers

2. Get unanswered questions in writing from all decision makers and influencers

3. Confirm scheduled call with Excel Legacy Group to get answers to those question, and any follow on questions that arise during the call

4. Receive progress updates (and possibly requests for help) from Excel Legacy Group as they and their ESOP lawyers, consultants, and investment bankers move the sales process to completion

5. After sales completion, receive your income!

There are no territories.  If disputes aren't resolved by the involved parties, e.g. commission split agreement,  WHYsPeople will arbitrate, which will likely result in every party being less happy with the outcome.

Statistics from Our Combined Team's ESOP Experience of Creating over 200 ESOPs

1. Average EBITDA for a small sample of deals (e.g. 5-10 transactions) 

   1. $5 million USD (5x the minimum EBIDTA so approximately $150,000 USD commission to WHYsPeople, with 50% of that paid to the Free Agent who made the sale and their trainers, coaches, and mentors)

2. Average valuation on that small sample size

   1. $35 million USD (7x EBITDA)

6 Opportunities for Free Agents to Earn Income from Completed Sales

1. Sell/market ESOPs

2. Sell/market whatever else you want (because we have more B2B and B2C offerings coming)

   1. (If you want to explore the B2C products available to sell today, ask David Martin.)

3. Matchmake/recruit/hire free agents who:

   1. sell/market ESOPs and/or whatever else they want, and/or 

   2. who build and lead organizations of free agents who sell/market ESOPs and/or whatever else they want

4. Coach/train/mentor your personal coachees how to:

   1. Sell/market ESOPS

   2. Sell/market whatever else they want 

   3. Matchmake/recruit/hire free agents who:

      1. sell/market ESOPs and/or whatever else they want, and/or 

      2. who build and lead organizations of free agents who sell/market ESOPs and/or whatever else they want

Income Flow

WHYsPeople's WHY is to ensure that all 8 billion people on our planet have at least one experience making money doing what they want to do, instead of what they have to do, so that they begin to understand that that they can live a life doing what they love.

1. The minimum compensation paid by Excel Legacy Group https://excellegacygroup.com/ to WHYsPeople for recruiting, training, coaching, mentoring, and paying Free Agents who sell ESOPs is $30,000 USD per deal.  It could be $300,000 USD or more.  It is based on 2.4% to 1.2% of the portion of the fair market valuation of the company that is converted to an ESOP.

2. WHYsPeople pays the Free Agent that whole commission, who then pays:

   1. 1/3 to to their chosen (1/9 to each)

      1. ESOP  COACH/Trainer/Mentor

      2. SALES/Marketing  COACH/Trainer/Mentor

      3. MATCHMAKING/Hiring/Recruiting COACH/Trainer/Mentor

   2. 1/3 to WHYsPeople

   3. 1/3 to themselves

3. If a Free Agent is paid by another Free Agent for their coaching, training, and mentoring, then from that payment the coach/trainer/mentor Free Agent pays:

   1. 1/3 to to their chosen (1/9 to each)

      1. ESOP  COACH/Trainer/Mentor (changeable 180 days after start or the last change)

      2. SALES/Marketing  COACH/Trainer/Mentor (changeable 90 days after start or the last change)

      3. MATCHMAKING/Hiring/Recruiting COACH/Trainer/Mentor (changeable 1 year after start then 90 days after the last change)

   2. 1/3 to WHYsPeople

   3. 1/3 to themselves

The net effect of this copyrighted and Patent Pending compensation plan is that:

1. Each commission is paid up through the Coach/Trainer/Mentor organization charts again and again until  the payment split by 1/3 or 1/9 is $0.00 or - because it is about to be paid to WHYsPeople - is instead paid to the Free Agent who made the sale, and then again is paid up through the Coach/Trainer/Mentor organization charts again and again until  the payment split by 1/3 or 1/9 is $0.00 or ... rinse and repeat.

2. The Free Agent who made the sale and their coaches/trainers/mentors earn 50% of each commission.  

3. WHYsPeople invests the other 50% of each commission in growing the corporate team, ecosystem, and Platform as a Service to provide each and every Free Agent with:

   1. more products and services to sell/market

   2. more ways to better support their current and future customers

   3. personalized coaching/training/mentoring that always adds value to the growth of their:

      1. mindset

      2. fulfillment and happiness

      3. skills/superpowers

      4. financial literacy

      5. wealth

   4. prompt payment of all commissions

   5. fulfillment of sold products and services that meets or exceeds expectations

   6. transparency of all of the above in the back office

   7. a global brand and public presence that further supports all of the above

Benefits for each Decision Maker and Influencer

Owner(s) for smaller businesses, Chairperson/Board/CEO for larger businesses

1. Guaranteed buyer when pursuing a liquidity event

2. Fair Market Value for the business because there are two independent valuations of the business as part of the process, one for the owner(s) and one for the employees

3. No financial obligation to a broker who may or may not get the sale done at the valuation they promised you

4. Larger second payment after 3 years of post-sale growth for up to 30% ownership owner-financed at initial sale

5. (plus the below benefits)

Owner(s) for smaller businesses, VP of HR for larger businesses

1. Employees will be in a safe pair of hands after the sale (themselves)

2. Increased employee morale, performance, loyalty, and retention after the sale

CPA Firm for smaller businesses, CFO for larger businesses

1. Increased borrowing power after the sale to reinvest in the company, refinance debt, or acquire businesses or assets 

2. Significant reduction in business tax liabilities after the sale

Lawyer or Law Firm for smaller businesses, General Counsel for larger businesses

1. Less risky and more well-defined sale process and agreements than when selling to the many varieties of third parties

Employees

1. Higher assurance of continued employment after the sale

2. Increased pride and say in how the company is run, as shareholders after the sale

3. Tax-deferred ownership stake in the business after the sale

Statistics from Our Combined Team's ESOP Experience of Creating over 200 ESOPs

3. Average enterprise value at the second bite of the apple 

   1. Average equity value (i.e., inclusive of excess cash) 8 years post closing is 75% higher than the ESOP transaction closing equity value

4. Average time it takes for the owners to get the second bite of the apple

   1. 3.5 years to seller note payoff 

   2. 8 years to seller financing warrant redemption 

Target Candidates - Sales/Marketing and Matchmaking/Recruiting/Hiring Leaders and Individual Contributors

• Investment Bankers

• Business Brokers

• Exit Planners

• Valuation Advisors, including Accredited Senior Appraiser (ASA), Chartered Financial Analyst (CFA), Certified Business Appraiser (CBA), Accredited In Business Valuation (ABV), Certified Valuation Analyst (CVA)

• Personal Wealth Advisors

• CPAs and other Business Financial Advisors

• Business Tax Advisors

• Business Lawyers and Law Firms

• B2B sales VPs, Directors, Managers, and reps 

• B2B marketing VPs, Directors, Managers, and reps - including inbound, outbound, offline, online, lead gen, social media, SEO, advertising, etc. 

• Matchmakers/recruiters for B2B sales, marketing, and matchmaking/recruiting leadership and individual contributor roles

• Chairpeople and Board of Director members

• VPs of HR

• CFOs

• General Counsels

• Business Owners

Questions that can help build rapport and spark curiosity with ESOP sales, marketing, and matchmaking/recruiting leaders and individual contributor candidates.

1. Have you considered making money selling or marketing ESOPs to businesses?

2. What would you use the money for?

3. Do you know that you can leverage your existing clients?

4. Do you know that you can leverage your existing network?

The Free Agent Work and Career Progression

The professions you can learn, and earn from, include:

1. Sales/marketing

2. Matchmaking/recruiting/hiring

3. Coaching/training/mentoring of:

   1. Sales/marketing

   2. Matchmaking/recruiting/hiring

To optimize your income, learn from free agents who earn more money than you in each profession and - if you want - matchmake/recruit/hire, coach/train/mentor free agents who want to earn at least as much money as you:

1. Discover and communicate to your network your WHY, personal brand, self-motivation, and daily discipline

2. Learn how to optimize sales/marketing

3. Learn how to optimize matchmaking/recruiting/hiring

4. Coach/train/mentor free agents how to 

   1. Discover and communicate to their network their WHY, personal brand, self-motivation, and daily discipline

   2. Optimize marketing & selling

   3. Optimize matchmaking/recruiting/hiring

It's best to learn each profession from a free agent who is earning about twice as much as you in that profession.

• How much can you learn from them if they earn less than you in that profession?

• Be careful if they're earnings are too far above yours.  You may not have enough skills yet to understand what they're coaching/training/mentoring.

Other criteria you may want to consider in selecting the free agents from whom you want to learn:

• Do we share similar:

  • WHYs, personal brands, self-motivation, and daily discipline?

  • values?

  • communication styles?

  • preferences for selling/marketing and matchmaking/recruiting/hiring, e.g. 

    • in person or online?

    • 1on1 or in groups?

  • geography?

  • language?

To earn the most income, you must help your free agents earn the most income.

Additional Resources

1. Recorded training sessions

   1. 2023 06 28 ELG ESOP sales training with Q&A

2. Very useful ESOP Statistics - Employee Ownership by the Numbers, February 2023

3. The Employee Ownership 100: America's Largest Majority Employee-Owned Companies, October 2022

4. Why Aren’t There More? Assessing Barriers to ESOP Creation, by Jared Bernstein, January 2020

Non-Solicitation of Excel Legacy Group and its Network

As a reminder, all viewers of this website have agreed to not to do any similar business directly (i.e., without involving WHYsPeople) with Excel Legacy Group and its network, nor directly or indirectly solicit any of their people, including:

Excel Legacy Group, LLC (the Company) is in the business of educating and assisting business owners with respect to employee-owned stock ownership plans (“ESOPs”). As part of the process, the Company brings together groups of ESOP lawyers, consultants and investment bankers (the “Company’s ESOP Partners”) to assist owners with their ESOP goals. The Company has spent substantial time and expense in developing its relationship with the Company’s ESOP Partners and the parties hereto agree that the identity of the Company’s ESOP Partners shall be deemed Confidential Information under this Agreement. Unless authorized in writing by the Company, WHYsPeople and its affiliates hereby agree that during the term of this Agreement and for a period of two (2) years after the termination of this Agreement that WHYsPeople and its affiliates shall not directly or indirectly contact any of the Company’s ESOP Partners for purposes of obtaining any products or services related to ESOPs.

Non-Solicitation of WHYsPeople and its Network

As a reminder, all viewers of this website have agreed to not to do any similar business directly (i.e., without involving WHYsPeople) with WHYsPeople and its network, nor directly or indirectly solicit any of their people, including:

1. WHYsPeople and its employees, contractors, and partners

2. Each Product & Service Provider and its employees, contractors, and partners

3. Each Free Agent and its employees, contractors, and partners

Non-Solicitation of Each Free Agent and their Network

As a reminder, all viewers of this website have agreed to not to do any similar business directly (i.e., without involving WHYsPeople) with each Free Agent and their network, nor directly or indirectly solicit any of their people, including:

1. Each customer and its employees, contractors, and partners

2. Each Free Agent who is paying the above Free Agent for training, coaching, and mentoring and its employees, contractors, and partners

Free Agent Agreement

Please download, sign, scan, and email to your coach(es) and legal@whys-people.com.