Is Co-Ownership a Give Away?

May 22 2023, by Matt Perez

Co-ownership is not a “give away.”

 

Co-ownership is not a give away, it’s selling to employees.

FAQ

But they end up as owners of my property!

Yes.

But you are not giving it way for nothing, you are selling it to them. Whatever you need, put it down in a proposed agreement and if they agree, you’re done. Otherwise, you negotiate and eventually you are likely to come up with something you all can live with.

You could even say, Let’s try this for N months, put the money in a fund, and if it is not working out, you can take the money back.

What if I want money up front?

Your ex-employees, now co-owners, can get a bank loan based on the company’s performance. They can then hand that capital to you. It would probably not be the full amount, but significant enough that you’ll agree to it.

And what if they run it into the ground?

They probably will not, but let’s assume they do. In that case you would have put a clause in the agreement to protect you from that situation. If they revenue goes down by X% of predicted, this agreement will be nulled and void…

What if I am not ready to sell my whole business?

Sure. If you want to sell only 50% of the business and your employees agree, then that’s fine. Practices are experiments.

Keep in mind that you are not negotiating with strangers, these are people that you have worked with and know pretty well. Just make sure the agreement works for all, including you.

Warnings…

As able and competent as you may see your employees, they are not business people. They love their profession, but dealing with a business is something that they, and most of us, have trained to not worry our pretty little heads about, or worse, to be disgusted by it.

You should plan to stay and teach them the ropes. They will tell you that they are ready to do it on their own and (wah, wah, wah) they don’t need you anymore. Congratulations, but you are probably not done. Plan to hang around a bit longer (e.g., as an on-demand consultant). The questions will come and it should be easy for them to reach out to you and your hard-earned experience and wisdom.

One more: You may have been doing too much and working harder than you had to. Don’t be offended if they say they are going to do things differently. This is an opportunity for you to learn, too.

Happy Endings!

You want them to succeed and they want to succeed. Nevertheless, keep in mind that we are trained from an early age to compete.

You were the boss and everybody submitted to you (more or less). Now all of you will have to learn to collaborate and deal with each other as equally well-intentioned and wanting your common work to succeed.

It is going to be strenuous for a while, but at the end of the tunnel you all get what you want.

By: Matt Perez
Co-founder RADICAL World

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