ShopBot has been converted into an employee ownership trust, which provides employees with direct benefits while still protecting the interests of existing shareholders.

After two and a half years at the helm of ShopBot, Ted Hall is about to retire, but the company and team he built from scratch are just like his first CNC machine. What should I do? His solution is to create an employee-owned trust, which he said has potentially huge benefits for employees, the company, and the community, while also taking care of the original shareholders. Although EOT is relatively new in the United States, it has a long history in the United Kingdom. What is more common here is the employee stock ownership plan, which is mainly related to employee retirement benefits. In contrast, EOT grants employees direct company shares, including continued profit sharing.

How EOT works. An employee stock ownership trust is a trust that holds company stocks for the benefit of all employees rather than individuals. Employees participate in the financial benefits of ownership by regularly receiving part of the company's operating income, just as shareholders receive dividends. Unlike ESOP, this is a more common form of employee ownership in the United States. Employees will not get their personal equity in the company, nor do they have to wait until retirement to see benefits. The trust is managed by a board of directors composed of employees, management and outside directors. The board of directors is responsible for setting the strategic direction, selecting the chief executive officer, reviewing the company's finances, and continuing to share revenue based on the trust formulation. As far as ShopBot is concerned, the trustee of its EOT will be an external professional hired to ensure that the terms of the trust are fulfilled. Although EOT is committed to maintaining the company's growth, ESOP is not the case. "The point of EOT is first, it's a much simpler thing," Hall said. "Easier to achieve and lower cost. It is very flexible." He said that EOT is oriented to the "now", which means it is a continuous profit-sharing arrangement and has nothing to do with employee retirement. Hall said: "If your organization has a lot of entrepreneurial spirit, and a group of people really want to keep pushing the company forward, then this is a good way to transfer ownership to them." Employee benefits in ShopBot's case , Hall describes EOT as the best employee ownership. "This means that employee involvement is now," he said. "You know, the world has changed a lot since the 21st century. People don't want to work for a company for 30 years." Employees can go in and out without participating in stocks, but always benefit from company profits during their employment. Trust holding companies is for the benefit of employees. In ShopBot, benefits are paid quarterly, but other companies may pay on a different schedule. Hall said: "We believe that the more you do it, the closer it is to the company's performance, and the more effective it is as a way to attract employees." Community Welfare Hall pointed out the value the trust provides to the community because The purpose of the trust is to make the company a productive part of the community. "This is a transition strategy and does not involve selling or moving the company," he pointed out. "The jobs are still there. The company's contribution to the community still exists." Compare it to many transition strategies that involve liquidation of assets, major restructuring, or the actual transfer of business elsewhere. The benefits of exiting shareholders Hall stated that EOT can compensate exiting shareholders very flexibly while transferring the company to trust and employee ownership. A large company with large assets can conceivably structure a transaction to immediately compensate existing shareholders. As far as ShopBot is concerned, shareholders basically provide 10 years of funding for this transaction. They used a valuation strategy based on multiples of EBITDA (earnings before interest, taxes, depreciation and amortization) and paid within 10 years. "If the company does well, the existing owners will do well," Hall said. If the company does not perform, then exit shareholders will face some risks, just as they provide funds for the normal sale of the company. Hall does not care about the risks in performance-based spending. He believes that this will help the company's prosperity and development, because there is no financial "albatross" to hinder the company as it moves forward. If the company is prosperous, shareholders can buy out in advance. "If you don't have a lot of confidence in the company, the management team, and the overall spirit of things, you don't want to do this," Hall said. Should you consider EOT? Hall frankly admits that EOT may not be for everyone. He admitted that he postponed his plan to withdraw from ShopBot. "I had so much fun," he said. He said that some companies may develop to the point where another large company or investor can acquire them at a high price, but he believes that 95% of small companies cannot adopt this strategic exit method, because traditional performance-based evaluations are for investors. No special attraction. He wanted an exit strategy that would allow the company to continue to thrive and benefit his hard-working employees. He said: "I believe it will be a win-win situation, because I have some confidence in what this gang will do." "If they do well, the company will do well, and if they do well, the shareholders who withdraw will also do well. Benefit." Employee Active Hall pointed out that his company has been operating in a way of open accounting and profit sharing, so EOT is not a huge change for existing employees. They recognize that EOT means more participation in corporate governance and profit sharing as employees. "They are very excited about all of this," he said. "But most importantly, we are just a small business, and everyone is preparing to launch the next tool."

To listen to Ted Hall's full interview on ShopBot EOT, check out the podcast.

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William Sampson is a lifelong woodworker who has been a small-scale entrepreneur and advocate of lean manufacturing since the 1980s. He served as the editor of Fine Woodworking magazine in the early 1990s and founded WoodshopBusiness magazine, which he eventually sold and merged with CabinetMaker magazine. He helped establish the Cabinet Manufacturers Association in 1998 and became its first executive director. Today, as the editor of FDMC magazine, he has more than 20 years of professional woodworking industry experience. His popular "In the Shop" tool reviews and videos appear monthly in FDMC.

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