8z President Ryan Carter said he was motivated to create this program in order to, “Build an organization that lasts… beyond us — beyond me.”
Employee Stock Ownership Plans are sometimes viewed as only being a good fit for certain specific industries. Manufacturing businesses, for instance, make up roughly a quarter of all ESOP companies. Architecture, engineering, and construction firms have embraced ESOPs at an increasingly rapid rate and have seen a marked benefit, reporting a 35% higher median value per employee than traditionally-owned firms.
But does that mean that if your business is outside of those fields, an ESOP isn’t for you? Not at all. Rather, an ESOP can be the foundation for building a new, and potentially game-changing way of approaching your business.
Just ask Colorado-based 8z Real Estate. A recent profile by the real estate news site Inman revealed that 8z is the first residential brokerage in America to offer its agents the chance to participate in an ESOP.
Real estate is driven by independent contractors. They typically work entirely on commission, with few or no benefits, and certainly no company-sponsored retirement savings plan. If real estate has a cutthroat reputation, it is because agents are forced to compete not only against other brokerages, but against agents at their own companies in order to secure listings and close deals, knowing that their financial futures and the future security of their families depends on a steady stream of closed transactions.
Since competition comes from within and from without in the real estate world, there is often little incentive for agents not to move to a new brokerage every few years, trading in one company’s resources for another that may seem more advantageous, such as greater brand recognition. That means brokerages must constantly be looking for new agents, and constantly be worried about losing their best veterans.
While 8z has not rewritten the rulebook altogether, by implementing an ESOP they have created a way for their agents to attain long term financial security by working together toward the common good of the whole brokerage, rather than every agent being out for themselves. And in doing so, they have created an incentive for their agents to stay with the firm that no other brokerage can currently match.
Since 2019, high-performing agents at 8z are given a small salary, healthcare benefits, a 401(k) with employer match, profit-sharing, and the become employee-owners, getting to participate in 8z’s ESOP.
8z President Ryan Carter said he was motivated to create this program in order to, “Build an organization that lasts… beyond us — beyond me.”
A real estate brokerage that endures beyond its leadership requires agents with institutional knowledge and the willingness to share it, traits that are common among ESOP companies. With profit-sharing and the retirement savings from the ESOP, both of which are tied to the performance of the whole firm, rather than individual agents, 8z has incentivized agents to stay for the long term, and to help one another succeed.
“It’s a nice carrot to say, ‘Look, if you work hard, it helps me. If I work hard it helps you. We’re in this together,'” said Angela Moss, who was one of 8z’s first employee-owners. “It’s not that we’re trying to beat each other out. Nothing is more satisfying than knowing that you’re part of a greater group, a bigger whole.”
When employees feel taken care of, supported, and that they have a stake in the success they work to create, it translates into a better experience not only for the employees, but for their clients.
“Now my survival and safety level, salary, healthcare and 401k and some future-facing things that could come down the line, I believe my basic needs are taken care of,” said 8z employee-owner and Air Force combat veteran Sergio Nazzaro. “Not only can I control and feel comfortable in my personal life, that allows me to show up in a certain professional space for clients.”
8z’s move to employee ownership appears to be paying dividends. According to Inman, their agents have above-average numbers of completed transactions and higher annual sales compared to agents nationwide.
It would not be surprising to see other Colorado companies becoming the first in their fields to implement ESOPs. Colorado recently launched a state tax credit that will cover up to $100,000 in transition fees to help businesses become employee-owned.
Menke & Associates offers free preliminary analyses specifically to help businesses determine what an ESOP could mean for them, how sustainable it might be, and what sort of restructuring might be required. ESOPs are not the right fit for every business, but if you think they are not meant for your industry, it’s time to think again.
Contact Menke & Associates today to learn what our team of ESOP experts can help your business accomplish.
Menke & Associates, Inc. has helped over 3,500 companies successfully transition to employee ownership. Our holistic ESOP approach enables a positive outcome for the company, its employees and its shareholders. We believe ownership is powerful.
Phil DeDominicis is an ESOP strategist and M&A advisor who has guided 300+ companies through ESOP formations, financing, and transactions over 20+ years at Menke & Associates. He specializes in selling ESOP‑owned businesses to financial or strategic buyers and in helping ESOP companies acquire other businesses.
