Why choose employee ownership?

The owner of any privately owned company at some point has to consider what to do with the business before retirement. No matter if you are looking for an early exit or want to keep working into your 70s.

There are different ownership models available to anyone selling a business, all of which have their plusses and minuses for the owner and for the employees. When I faced the decision of what was best for Fitwise I looked at options which included:

• Handing over to the family
• Selling out to a competitor (trade sale)
• Selling to a new owner
• Selling to the employees.

 The first option does not really work unless you get all the family involved which was not an option as they all had different interests. Selling to the people you have been trying to outwit for 20 years was also counterintuitive and the chances are that they would have stripped out the profitable bits and closed the business off.

Finding a new owner in my view would have meant that the existing staff would have had to continue working their socks off for someone else’s benefit.  So the only logical option was that to give them an opportunity to benefit from the profit (or loss) of the business in the future.

The more you look into the benefits of employee ownership the more it makes long term sense. Generally employee owned businesses are more successful, they are less likely to be taken over and their employees are happier.  The downside is that to avoid saddling the business with too much debt the amount of money which can be realised in an employee buyout can be less than a trade sale.

We are now one year on from the start of the journey and the team at Fitwise own a portion of the shares and eventually the employee benefit trust will hold 80% with the remaining 20% being open to the staff to purchase.

Have things changed as a result? Yes in some ways they have but there is a long way to go to realise the full potential. The balance between giving employees ownership in key decision making without having a ‘vote’ on everything and still having an effective management decision making structure needs to be worked on. The team is gradually understanding more about share ownership, dividends, what effects share value, SIPS and the complex world of trusts. We are trying different forums to ensure employee engagement.  We have a very active social responsibility programme and the business is growing very quickly.

We are looking at improvements in terms and conditions, working out what we can afford, what’s important to each member of staff.

Ask me in two or three years and I will be in a better position to say if employee ownership is an unqualified success, all the indicators are that it will be but we have to get to a point where we are not doing everything for the first time, where the team can see real benefits and the dividends and shares are delivering benefits.

John Matthews, Chairman, Fitwise Management Ltd.