Business Valuation Blog | Understanding Buying / Selling a Company

How ESOP Plan Business Appraisal Provides Real Employee Ownership

Posted by Business Valuation Specialists LLC on Sep 16, 2019 8:00:00 AM

ESOP Appraisal

When you're considering an employee stock ownership plan for your business, how do your employees know whether the value they perceive from their shares is realistic or not? Business values fluctuate with a wide range of factors, from industry changes to market conditions and consumer interest to supplier price changes. How do you ensure that your employees feel true ownership in your business? One option to consider is having an ESOP Plan Business Appraisal performed by an independent third party. Here's how this type of appraisal helps to build trust by your employees in the ownership you're creating for them.


How ESOP Plan Business Appraisal Provides Real Employee Ownership

If you've created an employee stock ownership program for your company, you may have realized that there's a difference between simply creating the program and creating a sense of real ownership in your employees. Many companies simply stop at offering stock to their employees, but fail to create solid ownership. In some businesses, lack of trust in management can cause employees to hold back from taking true ownership in the company. But to really create solid growth and improve employee franchisement in the company, having a transparent process is vital.

One of the best ways to create that transparency is by not relying on your company's own internal reviews, audits and accounting, but by providing a business valuation of your company from an independent third-party appraiser. This process allows employees to see exactly where your company stands. A valuation report provides detailed information on your company, including its strengths and weaknesses. Your employees can see whether the market issues that you've mentioned in the past are really a concern, or if they are simply an excuse to keep from moving in a particular direction. It provides them with validation of the information that you're providing to them, from an independent party that has no vested interest in whether the report favors your management team or the employees at large.

But what if your employees have strong confidence in your company's management team? Even in these situations, having a business valuation performed and distributing the results for employee review can still reap great benefits. The strengths and weaknesses that will show up in your report help to show the employees where improvements need to be made. This insight allows your employees to carefully consider areas for improvement and new ideas that they can recommend, giving them the opportunity to take true ownership in your business. It allows you to harness the full potential of every employee at your company for the company's improvement and growth, rather than simply hoping that someone speaks up if they have an idea, because they have a vested interest in seeing their company succeed.

An ESOP plan business appraisal is a great way to improve employee interest and sense of ownership in your company, because it's calculated by an independent, third-party appraiser. This gives you a great place to build your business further in the future, through the feedback that you and your fellow employee-owners receive in the appraisal report. However, for this reason, it's vital that you use a certified business valuation specialist during the process so that the results you receive have been properly calculated using standardized methodologies.

Topics: ESOP Appraisal