Progressive Grocer Independent

AUG 2016

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August 2016 | Defining the Independent Market | 35 Business Next-generation Transition/ESOP T he succession of the business can be one of the hardest processes that an independent retailer can plan for, and many put it off, maybe because they don't want to face the reality of their business without them. While it may be easiest to sell the business outright to another family member or an outside party, some owners de- cide that an employee stock owner- ship plan (ESOP) is the path to the future. is is an attractive option for owners — regardless of whether they have a next generation of family interested in the business — who feel employees deserve a part of the business. Many independent retailers fall into this category, as their relation- ships with staff often develop into almost familial ties. However, an ESOP isn't viable for all businesses. Depending on the type of ESOP set up, an independent grocery company should have a real market value of at least $4 million, says Dick May, managing partner for AWC Advi- sors, in Chicago. For stores with a valuation of less than $4 million, ESOPs can be an expensive way of going forward. Newport Avenue Market created an ESOP last summer after having considered one for at least 15 years. When owner Rudy Dory first looked at the option, the business wasn't large enough. Last year, the business had grown enough that he and his daughter, Lauren Johnson, CEO and "Leader of the Pack," decided to take the leap. e Bend, Ore., business has had double-digit sales growth for the past five years. "We believe the strength of our company lies in our employees, and we wanted to share in that as well from an ownership standpoint," Johnson says. While May suggests a value of $4 million, Johnson feels that independent supermarkets should have a value of at least $20 million to make the process worthwhile and sustainable. Everything costs money, she notes. "I thought I had a good grip on everything costing money Navigating the employee stock ownership plan. By Katie Martin The ESOP Solution

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