02 Jul Structuring North Carolina’s First EOT: The ShopBot Tools Journey
How do you prepare a company for an owner’s transition—and help that owner choose the right path forward? When I first met Ted Hall of ShopBot Tools, Inc in 2017, he was exploring two key goals: increasing financial transparency and identifying the best exit strategy.
We began with open-book management through The Great Game of Business, engaging and educating the entire team. This approach not only improved profitability, but also helped employees start thinking and acting like owners.
From there, we worked with a talented team to structure North Carolina’s first Employee Ownership Trust (EOT)—an innovative and values-aligned succession plan.
Why An Employee Ownership Trust Made Sense
ShopBot was well positioned for an EOT. At 35 employees, it was on the small side for an Employee Stock Ownership Plan (ESOP), and Ted had the pioneering mindset that made exploring a newer form of employee ownership possible.
Navigating Legal Complexities
Structuring North Carolina’s first EOT required navigating uncharted territory, including working within the state’s trust law framework, ensuring federal tax compliance, and creating appropriate employee governance systems for a small company.
The Innovative 10-Year Earnout
Instead of a traditional lump-sum purchase, we structured 10% annual payments over 10 years, tied to EBITDA performance. This aligned Ted’s interests with company success while providing immediate employee benefits, unlike the more retirement-focused ESOPs.
Why EOTs Are Gaining Traction
EOTs offer several advantages over traditional structures:
- Simplicity: Less bureaucratic complexity than ESOPs
- Immediacy: Employees benefit right away, not decades later
- Flexibility: Easier to structure creative solutions like our earnout model
- Governance: More straightforward employee participation
Key Success Factors
Several factors were critical to ShopBot’s success: genuine owner commitment to employee ownership, existing financial transparency, willingness to work through first-of-its-kind legal structures, and staff already thinking like owners.
The Full Conversation
I recently joined Ted on Zolidar’s “Bicycle for the EO Mind” podcast to discuss the complete ShopBot EOT journey, diving into legal complexities, decision-making processes, and real-world impacts of choosing employee ownership.
I’m excited to share the full story alongside Ted in Zolidar’s latest Bicycle for the EO Mind episode: When Buyers Don’t Knock: ShopBot’s Profitable EOT Exit