Provide an exit strategy.
In almost every small business, the owner or owners will eventually want to leave. Selling the business to employees can be a way to provide continuity and preserve the culture of the business.
Attract and retain good employees.
Many small businesses have trouble attracting and retaining good employees. Using employee ownership as an employee benefit can be an important way to address this problem.
Several reliable studies indicate that, on average, employee-owned firms perform substantially better than non-employee-owned firms when ownership is combined with employee participation in decisions affecting their work. A survey published in the ESOP Report (August 2003) revealed that ESOP companies outperformed the three major stock indices in 2002: the Dow Jones Industrial Average, the NASDAQ composite, and the S&P 500. This means “once again that the decision to become employee-owned through an ESOP means better company performance and greater wealth creation for the employee owners.” (ESOP Report 8/03).
Improve wages and benefits.
Employee-owned businesses tend to pay higher wages and provide better benefits.
Provide tax benefits.
Certain employee ownership structures qualify for tax benefits, which can be substantial.