Ideal Candidate for Conversion to Worker Ownership

If you look at the landscape of business owners, you will quickly realize that they are not all the same. At one end of the scale are the people who run a small business as a side hustle or even as a full time occupation, but they never hire anybody. They usually stay small, sometimes because they like it that way. This is by far the largest group of owners.

At the other end of the scale are the entrepreneurs who have built a business from scratch and now use other people's money to grow it beyond what he could have done alone. These are the ones who eventually sell for some ridiculous multiples. This is the smallest group of owners. Only few are able to achieve this. When they do, they sell and then often do it over again.

In between these extremes are the small business owners who just want to escape the shackles of a regular job. John Warrillow, author of Built to Sell: Creating a Business That Can Thrive Without You by John Warrillow (28-Feb-2013) Paperback, calls them Freedom Fighters and that's what they are. They value their freedom to live their lives on their terms sometimes even if it means making sacrifices in other areas of their lives.

They comprise about 25% of the owners and have revenue of roughly $500K to $10M. They do typically hire at least some employees and sometimes grow to significant size. They typically rely on their accountants and lawyers for advice and sometimes other entrepreneurs like themselves. Growth is often on their minds, but they cannot quite make it happen preoccupied as they are with day-to-day operation. They typically hold on to it for decades. They rarely sell it until they have to and rarely make plans ahead of time for how to go about it.

In one respect they resemble their self-employed brethren: They are firmly in control of their business. They do not share decision making with anyone. As a result, just like them, the business cannot run without them. It totally depends on their presence day in and day out and that is a problem. It makes the business unsalable, particularly the smaller ones. No one else can step in and successfully run it. Everything will grind to a halt should the owner suddenly leave which happens in a lot more cases than you might think.

That makes them perfect candidates for conversion to worker cooperatives

The workers are the perfect buyers. They already know how to operate the business. They are concerned about the alternatives, loosing their jobs or have them changed by a new owner. The biggest obstacles are 

• Leadership and 
• Financing

One of the reasons their serial entrepreneur colleagues are able to start and grow multiple businesses is their ability to see the big picture. Unlike small business owners who remain small, they are visionaries who rarely get bogged down with the details. They hire people to do that.

Small business owners tend to have tunnel vision focusing on the day-to-day and tend to overlook the obvious and therefore frequently dismiss ideas like selling to their employees without even considering the possibilities. How we solve these obstacles will be the subjects of other posts, but now at least you know who the best candidates are.

Related article:
Is Employee Ownership for Your Company?

Built to Sell: Creating a Business That Can Thrive Without You by John Warrillow (28-Feb-2013) Paperback

Warrilow tells the story of a fictitious heads-down small business owner as he gets mentored into a heads-up owner who successfully turns a struggling business into a salable one.