When PivotPoint Business Solutions began working with Joe Wojciechowski, owner of Wojo’s Greenhouse and Garden Splendors in Davison, MI, on succession and exit planning, his situation had the same similarities and patterns as other horticulture business owners. Wojciechowski had poured decades of hard work into building a profitable grower-retailer business, but with no family interested in taking over, and concerns about the future of his team and legacy, he faced tough decisions if he wanted to step away from the business in five years.
Wojciechowski initially assumed a third-party sale was his only viable option. But like many in the industry, he worried about the impact on his employees, culture, and reputation. Questions about timing, declining industry valuations — especially for C-Corps, where valuations have dropped around 20% — and declining buyer interest due to market conditions only added to the complexity. Would it be better to sell now, liquidate, or explore alternative solutions?
The Case for ESOPs: A Win-Win Solution
Through PivotPoint’s guidance and collaboration with experts like Tim Jamison of Prairie Capital Advisors, Wojciechowski worked with PivotPoint and Prairie to assess the differences between M&A (merger and acquisition) and Employee Stock Ownership Plan (ESOP) options. He ultimately settled on an ESOP. Increasingly popular among horticulture business owners, an ESOP offers a unique exit strategy that balances financial goals with a commitment to legacy and employee well-being.
An ESOP is a qualified retirement plan governed by ERISA (Employee Retirement Income Security Act), similar to a 401(k) but with added flexibility and tax efficiency. Owners can sell part or all of their business to an ESOP Trust, enabling employees to become indirect owners while maintaining the company’s culture and legacy.
Dispelling ESOP Myths
Common misconceptions often deter business owners from considering an ESOP:
“My Business Is Too Small.”
In reality, businesses with as few as 15 employees and a value starting at around $1 million can be good candidates. While the large majority of ESOPs are larger than this, an ESOP can be a valuable ownership transition alternative for smaller companies.
“It’s Expensive and Complicated.”
According to Jamison, “While there are setup and ongoing administrative costs, they’re often comparable or lower than the expenses involved in a third-party sale and often substantially less depending on the complexity of the sale.” He adds, “When comparing transition alternatives, fees should not be the only deciding factor. Weighing the options compared to the owners’ goals and objectives is key for their future and the future of the employees.”
“My Employees Don’t Have the Financing to Make the Purchase.”
In fact, a bank or commercial lender, usually facilitated through a company like Prairie, provides the first layer of financing, while employees benefit from partial ownership distributions thereafter.
“Employees Will Take Control.”
Employees gain ownership benefits without management control or access to the books, records, or confidential information. They will receive an annual statement that shows the beneficial value of the shares allocated to them. The actual shares — and the voting rights that go with them — remain in the ESOP Trust, and the company continues to operate under its existing leadership structure and its board of directors.
Why Consider an ESOP?
For owners like Wojciechowski, an ESOP provides:
- Financial Benefits: Tax savings (including the possibility of deferring capital gains), competitive valuations (fair market value), cash at closing, and the ability to continue to draw a salary.
- Legacy Protection: Ensures the business continues to thrive under a familiar culture and a more controlled, private sales process.
- Employee Engagement: Increases morale and productivity by aligning employees’ financial futures with the company’s success.
ESOPs can also insulate the business from market volatility and safeguard against having to wind down or liquidate — a route too many horticulture businesses have taken recently.
Is an ESOP Right for You?
While ESOPs offer significant advantages, they’re not for everyone. They require ongoing owner involvement during the transition (typically over five years), planning for future share repurchases as employees become fully vested, retire, or are terminated, and careful selection of advisors and trustees. For those seeking a cash-heavy buyout or quick exit, a third-party sale may be a better fit, especially if your employees or legacy are not driving factors.
According to Jamison, “Having a good team of advisors is important when selecting an ESOP alternative — experts who know ESOPs and can guide you as an ESOP company. It’s also important to analyze your ownership transition alternatives and understand the pros and cons of each. ESOPs are a great exit vehicle for many business owners. But they definitely don’t work for everyone.”
Still, the horticulture industry is increasingly embracing ESOPs as a pathway to longevity and growth. There are currently more than 6,500 ESOPs in the U.S., with more than 13.9 million participants and total assets owned, amounting to more than $1.6 trillion. According to the Employee Ownership Foundation, 92% of businesses with ESOPs report that it was a good decision, with many seeing increased revenue (78%), profitability (69%), and stock value (83%) determined by outside independent valuations.
Looking Ahead
As the industry grapples with challenges like declining valuations and market consolidation, ESOPs offer a compelling alternative. For Joe Wojciechowski and Wojo’s Greenhouse, choosing an ESOP ensured a secure future for employees and a lasting legacy for the business — a story that could inspire others.
For horticulture business owners, the question isn’t just when to exit but how to do so in a way that preserves your life’s work and benefits everyone involved. With the right planning and advice, an ESOP could be the solution you’ve been seeking.
