In the heart of Frisco, Texas, two passionate entrepreneurs, Brad Herrmann and Hai Nguyen, set out to change the landscape of automated calling and texting. Founded 18 years ago, their journey began with a clear vision: to create a company where founders and employees alike would thrive, driven by shared values, excellence, and purpose rather than the constraints of profit margins or bureaucratic red tape. Their motivation stemmed from a personal experience: they had seen the essence of a company’s culture erode after Brad’s father’s company, where they both worked, was acquired and steered off-course by the new management. This shared experience fueled their desire to establish a different kind of business. Through sheer determination, a focus on community and employee well-being, and by introducing innovative functions not previously seen in the mass texting/calling arena, they transformed a small startup into a respected industry player.
Fast forward to the present, and Text-Em-All is a testament to the founders’ vision. With a team of 43 employees, they offer mass messaging services, supporting businesses and organizations spanning multiple sectors, including private enterprises, non-profits, healthcare institutions, universities, and schools. Their commitment to excellence has garnered them numerous accolades, including landing on the 25 Forbes Small Giants List in 2018, and earning the prestigious Certified Great Place To Work® title for two years in a row. As a testament to their influence in the tech arena, Text-Em-All was recently honored with the 2023 Tech Cares Award by TrustRadius, which emphasizes core pillars of corporate social responsibility such as volunteer work, promoting diversity and inclusion, charitable contributions, fundraising initiatives, and fostering a positive workplace culture. With Brad and Hai at the helm, and without the external investor pressures typical of many tech companies, the company’s core values remained constant even as it scaled.
Inspired by the success stories of purpose-led businesses they admired and fueled by their desire to establish Text-Em-All as a 100-year-old company, the founders embarked on their exploration into employee ownership models in 2019. Even without immediate retirement plans on the horizon, the priority was clear: create a structure that safeguards the company’s legacy, while allowing the founders to continue to play their critical leadership roles. In a dialogue with Common Trust, Brad Herrmann emphasized the value of forward-thinking in exit planning:
“To anybody looking at considering employee ownership or any kind of an exit from your company: starting early seems to be a really, really big part of success. All business owners, if you wait too long, you might feel rushed or forced into doing something. If you can start early, you can do some of these things very, very slowly over time. Hai and I think we’re going to be around for quite a while. And that gives us a lot of options and flexibility in terms of what we ultimately decide to do. And that has been probably the biggest ace in our hand that we are taking advantage of.”
Why an Employee Ownership Trust?
Initially, Text-Em-All considered transitioning ownership directly to their employees, effectively granting them partnership status. However, this idea faced several hurdles: it limited the participation to 200 members, excluded their H1B non-citizen team members, and posed potential complexities in tax management for employees, making the administrative process daunting.
Shortly after, the company worked with advisors to implement an Employee Stock Ownership Plan (ESOP) – abandoning that prospect after $200,000 in professional fees and just one week before it was set to be implemented. Brad admits their exploration into ESOPs began with advisors who he felt could not adequately capture their vision. Further, Brad, who identifies as a learner, found himself overwhelmed by the intricate details and countless methodologies within the ESOP model. More than its complexity, the rigidity of the ESOP structure became concerning. An error in the ESOP model would not just be challenging to rectify but could lead to potential conflicts with regulatory bodies like the Department of Labor. This model did not align with Text-Em-All’s core objective of equitably distributing company gains to its employees and allowing them to realize those gains while employed by the company. Brad’s final realization, which prompted a rethink, was the unintended consequence of creating a “haves and have-nots” situation. The ESOP model could inadvertently result in only a select few benefiting immensely, contrary to the inclusive environment the company had worked so hard to build. Most importantly, this structure did not protect the company from being sold in the future.
Text-Em-All’s search for an alternative led them to the Employee Ownership Trust (EOT) model, which offered the simplicity, flexibility, and alignment they were looking for. Unlike other employee ownership structures they had considered, the EOT structure allowed Text-Em-All to create a system where employees can participate in financial benefit-sharing and influence some governance decisions. This approach avoids the complexities associated with yearly valuations, stock buybacks, ERISA or DOL regulations, and eliminates the risk of a fiduciary selling the company ostensibly for employee interests. Without being bound by strict regulations, Text-Em-All was able to shape a governance structure in line with their culture, emphasizing simplicity and fewer unnecessary formalities. This structure ensured that the roles of the company’s founders and management could remain intact. Alongside the governance structure, the company designed a flexible profit-sharing structure that allows employees to participate in company upside, without the risks or regulations associated with traditional shareholding. The EOT structure will safeguard Text-Em-All’s independence and purpose indefinitely, establish checks and balances for future leadership to maintain the company’s ethos, and enable adaptability for any shifts in company vision or direction.
Collaborating with Common Trust, Text-Em-All found a partner who not only understood their objectives but provided the needed technical guidance through the transition.
“Our experience with Common Trust started with purpose and the why behind what we were really trying to do. And sadly, that was a stark contrast to some of our other experiences. That is the most important question Common Trust asked: ‘What is it that you’re trying to accomplish and why?’ Leading with ‘let's start thinking about purpose and how to protect your culture and values over time’ – starting with that and making sure that we were generally aligned to even proceed down this kind of a project just made a lot of sense.”
After looking at various transaction structures and financing options, Text-Em-All and Common Trust charted out a transaction structure that met the dual goals of:
- Providing liquidity to the company’s shareholders while ensuring financial flexibility to protect the company and its employees. The owners of the company will gradually be bought out, allowing them to capture a higher buy-out value as the company continues to grow.
- Implementing a comprehensive profit-sharing program for employees, enabling them to participate in the company’s financial success without personal capital investment, vesting schedules, or exposure to potential downturn risks.
In pursuing an EOT structure, Text-Em-All wasn’t necessarily seeking a change in ownership; rather, they aimed to encapsulate the ethos that had propelled their success – collaboration, transparency, and simplicity. Hai Nguyen, describing his inclination toward the EOT model, shared, “One of the challenges with the other models is that they feel like they are trying to fit us into this box that we might not fit into… having a custom solution built for our particular goals and needs was really valuable.”
Text-Em-All’s transition to an EOT model not only positions the company for a century-long legacy, but serves as a shining example of how businesses can truly align purpose with profit. The unique design of Text-Em-All’s EOT combines flexibility and simplicity, and the bespoke transaction structure allows shareholders to achieve liquidity in a way that does not jeopardize company health or the ability to share profits with employees. Today, Text-Em-All isn’t just a business; it’s a community. With 43 new employee-owners onboard, they will continue to serve their clients, employees, and community with the same passion and commitment, embodying the mission set out by Brad and Hai 18 years ago.