As COVID-19 spreads across the country, we know that your health and the health of your fellow employee-owners is your top priority. And we know you are also concerned about the health of your ESOP. Will it be there as a resource for those who need it most in the times ahead?
The Menke Group is working hard to stay on top of all the latest developments in this evolving situation in order to provide our clients with the best possible guidance. No one knows exactly how long this health crisis will last, or precisely how much it will disrupt the economy, but we remain committed to supporting your business every step of the way.
There is good news. Studies have repeatedly shown that ESOP companies are more resilient in times of adversity, less likely to lay off employees, and more likely to hire them back on if they do. But that doesn’t mean ESOP companies are immune from the effects of this global crisis.
The best way to safeguard your ESOP now is to prepare for the future. As part of your annual ESOP valuation, your analyst will be looking closely at:
- Business Plan. Many companies struggle in times of crisis, while for others it’s business as usual, and some even thrive. Does your business plan account for how you might continue to serve your customers and protect your workers in a time like this?
- Business Continuity Plan. What will you do in the event of a significant long-term disruption to your business, such as having to shut down your headquarters due to illness? Do you have redundancies and backups in place to ensure that your business can continue to operate even without key leadership or infrastructure?
- Contingency Plans. Will your business be able to maintain normal services and sales in the event of an unexpected interruption in your normal operations, e.g., if the coronavirus causes one of your suppliers or your IT providers to become unreliable or unavailable? Do you have backups and workarounds in place?
- Financial Projections. Do your assumptions about the future reflect the current market situation? Many businesses have seen their operations disrupted and a resulting loss of revenue due to the coronavirus. We do not know if this is a short or long term issue, so be prepared to develop what-if scenarios for valuation purposes.
If your business is currently in the middle of an ESOP transaction, all of these same considerations apply.
Since our founding in 1974, we have guided our clients through many uncertain times. Please contact your Menke advisor today for assistance with these, or any other ESOP questions or concerns. We look forward to helping you through this difficult time, and through many brighter times ahead.
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.
