Succession planning can be an almighty headache. One option you might not know much about is employee ownership – but it could be just the thing
For coach operators looking to retire, the options for succession can seem quite few.
If you don’t have relatives keen to take it on, and you can’t find a buyer with the requisite knowledge and passion for the industry, what can you do – except close it?
But there is another way: The John Lewis way.
John Lewis Partnership is the UK’s largest and best-known employee-owned business. Employee ownership has been on the rise over the past five years, but so far, its take-up among coach operators has been very small, despite it being very well-suited to small- and medium-sized family businesses in particular.
It’s a method of carrying on the business – and the family legacy – that Alfa Leisureplex Group (ALG) has found very effective.
What is employee ownership?
Employee ownership is a type of business structure: An alternative to a sole trader, a limited company or a PLC.
In an employee-owned business, some or all of its shares and equity rests in the hands of all the employees. The equity is held in a trust on behalf of the beneficiaries, the current employees.
“It’s a well-tested model,” says Deb Oxley, Chief Executive of the Employee Ownership Association (EOA).
“It’s proven to deliver great benefits. The involvement of employees leads to higher levels of engagement; the group of employees don’t feel like they’re ‘just’ employees, but owners.”
John Lewis is the big one, but other notable employee-owned businesses are consultancy Steer Davies & Gleave, and logistics firm Unipart, while ALG is the 30th-largest in the UK.
“Most businesses going to employee-owned experience a significant effect in increased productivity, lower costs and increased profitability,” says Ms Oxley. “Over time, they prove to be more resilient. They’re able to better use the asset of their employees, and involve employees in difficult decisions that arise in difficult times.”
Gradual exit option
Employee ownership seems particularly well-suited to coach operators. Not all operators have family members willing to follow in their footsteps, while selling a coach business is notoriously tricky – and cannot guarantee any kind of legacy for the outgoing operator.
“For a coach operator – an independent business, providing a customer-facing service that relies heavily on the quality of its people – it’s an attractive proposition,” says Ms Oxley. “Many founding owners of small businesses find it challenging to retire; they’re so wedded to the business, sometimes it’s not even on the cards. You’ll hear them say ‘I’ll be carried out in a box’.
“Going to employee ownership allows them to stay in the business, and perhaps make their exit gradually over time.”
Tax incentives
So why aren’t more coach operators employee-owned?
Ms Oxley cites the fact that in succession planning, business owners will turn to their accountant for advice; and until recently, awareness of employee ownership as an option among accountants and other professional advisors has been low.
In the last five years, however, awareness has grown, due in large part to the work of the EOA.
And, happily, the government has also seen the benefits. It now provides attractive tax incentives; if you move to employee ownership, you can benefit from an exception to Capital Gains Tax, and linked to that is an opportunity to provide tax-free bonus payments.
Coaching success
Employee ownership has enabled AGL’s founders Peter and Paul Sawbridge to retire, knowing that their business is in the safe hands of the people who care about it.
Since its move to employee ownership in July 2015, ALG reports that not only is employee engagement at a much higher level than before, but customer feedback is also at an all-time high, and profits have increased; the move has positively affected every aspect of operation.
Emma Russell, Finance Director, reports that members of staff are more likely to turn the garage lights off, for example, because it’s “their” electricity now.
Ms Oxley says: “What ALG has done is entirely understandable. As a business they rely on brilliant customer service, and it’s a family-owned business that couldn’t see itself being sold; it couldn’t imagine carrying on without the people who built it up.
“Everything ALG has done so far is a perfect exemplar of an employee-owned business.
“We’re delighted that more businesses are moving to employee-owned – and we’re happy to help more coach and bus operators to do it.”
- If you’re interested in being employee-owned, contact Deb Oxley on 01482 667122 or deb.oxley@employeeownership.co.uk, or visit employeeownership.co.uk
Comment
routeone is aware of many coach operators that have struggled to continue their legacy when they get to retirement age, or who would like to retire, but feel that they can’t.
Employee ownership is said to be ideal for small-medium-sized businesses in particular, and it’s hard to see any downsides. All the staff benefit when the business is doing well, and pull together in difficult times – something that was proved by the last recession, when employee-owned businesses demonstrably outperformed their non-employee-owned counterparts.
Where better to put your beloved business than in the collective hands of the people who have helped you build it?