In an era marked by millions of small business owners preparing to retire and find buyers for their businesses, Clegg Auto has emerged as a remarkable example of the power of Employee Ownership Trusts (EOTs) as a high-performance, legacy-aligned pathway for small business owners to exit, recording a doubling in profit since its transition last year.
Navigating the labyrinth of exit planning for small business owners has long been a challenge for those seeking to find a buyer they can trust. With stories of new ownership coming in and dismantling teams, culture and values, it's not a surprise that over 75% of business owners go on to regret their sale within a year. Clegg Auto, however, took a different route by choosing to exit into an Employee Ownership Trust, and the effects have quickly resulted in better business performance and higher profit sharing with workers.
What sets EOT companies apart from Employee Stock Ownership Plans (ESOPs) is the simplicity and focus on long-term employee welfare. When considering an ESOP versus an EOT, remember that ESOPs require substantial investments and complex governance, while EOTs offer a more cost-effective and streamlined alternative. This simplicity aligns with the needs of small businesses like Clegg Auto, allowing them to allocate resources toward growth and innovation rather than administrative overhead.
Clegg Auto's decision to embrace the EOT model in August 2022 marked a turning point in the company's history. Formerly majority-owned by brothers Kevin and Steve Clegg, the group of four auto repair and body shops has long been a standout company in the Utah business community, known for its high-quality customer service. The four companies' transition to a single employee-owned company structure was pioneering, marking the first EOT holding company in the United States. With all 55 employees participating in profit sharing and governance, the company's commitment to inclusivity and shared success has become a cornerstone of its strategy.
"We had our best quarter in company history after becoming employee-owned, and this last quarter we nearly doubled those results again, as well as hit our highest-customer satisfaction metrics since the company was founded."
—Kevin Clegg, CEO, emphasizing Clegg Auto's performance benefits since transitioning to employee ownership.
Common Trust, a trailblazer in employee ownership trust buyouts, played a pivotal role in guiding Clegg Auto's successful transition. In addition to working directly with the Clegg team to build an Employee Ownership Trust customized to protect its key company values, Common Trust also provided capital for the transaction through its sister fund.
Clegg Auto's transformation also stands as a testament to the "ownership flywheel" effect, where employee empowerment fuels motivation and drives performance. The company's decision to share profits equally across different locations exemplifies its commitment to fostering a united team, directly aligning employee benefit with company performance. Ultimately, the employee ownership trust benefits for employees are comprehensive and powerful, offering a unique upper hand to businesses that employ an employee-owned company structure in their respective industries.
As business owners search for the optimal path forward in terms of succession, Clegg Auto's journey shines a spotlight on the advantages of Employee Ownership Trusts. Its story invites others to follow suit, ensuring the preservation of their company's values and culture while empowering employees to take on a renewed sense of ownership in the organization's future.
For those interested in exploring the possibilities offered by Employee Ownership Trusts, consider scheduling a free advisory session with Common Trust, the experts who guided Clegg Auto's remarkable transformation.