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How employee ownership could give your business a boost

by jcp
Editorial & Advertiser disclosure
gawdo

By Antonio Wedral and Sam Hurley, Co-founder & Chief Strategy Officer – NOVOS

Agencies need to be people-first. From staff to clients to partners, people dictate whether an agency succeeds or fails. Our vision has always been to go a level above the typical “people-first” term most agencies use. Instead, our vision has been to be a “people-led” agency.

As of March 2022, NOVOS (Statement Group Ltd) officially became an employee owned company. The same team, same values, same pricing, same culture but now everyone benefits from the success and growth of the business.

What is an Employee Ownership?

Employee Ownership (EO), is sometimes referred to as the John Lewis model.

EO is a government incentive to encourage more businesses to be run by the employees. You can read more details about what it is here. As well as the John Lewis model here.

In a nutshell, for NOVOS:

  • Sam and Antonio have sold 90% of their shares to an ‘employee trust’.
  • This trust is a legal representation of the employees set up as a separate entity on companies house.
  • The role of the trust is to represent what the employees want and need, giving them a voice and say in how the company is run.
  • We’re also launching a People Committee which is responsible for collecting feedback, ideas, and issues across every part of the business and feeding that into the Trust.
  • Sam and Antonio still run the day to day business with the leadership and management team, however, any larger decisions that will directly impact profits need to be voted for or against by the trust for final sign off (e.g. new market, service expansion, and very senior hires).

It’s important to note this is not an EMI scheme. It’s very different and is treated as a business sale to another company. In this instance the new company is the employee ownership trust (EOT) referenced above.

How does this differ from a normal ‘sale’?

We strongly believe that this is a better route than a traditional merger or acquisition for an agency.

We can list out incredible agencies that no longer exist due to the purchasing company absorbing the brand once the founders have left. We are yet to hear a positive story about an agency that has been purchased by another.

This is a very common trend and compromises the longevity of small and medium-sized agencies.

The worst stories we’ve heard are from our current staff that have been through sales at previous agencies they’ve worked at. Everything that they’ve joined gets ripped up and ultimately impacts their personal lives.

The table below is how we see the benefits of an EO vs a traditional agency acquisition route (this is a visual we shared with the team)

The only beneficiaries of a ‘traditional’ route are the founders. They typically get a lump sum of the valuation, then they are put on an earn-out with targets they’ll never achieve.

They leave, their reputation with the staff they hired is destroyed, and eventually, the business they built gets ripped up. Either it becomes a shell of the company they built with a poor reputation or it’s just absorbed by the holding company.

Why have we opted for Employee Ownership?

Below are the 3 core reasons of why we decided to go down the EO route vs a traditional sale to a larger company:

  • Values: Our company has always been ‘people-first’, so many agencies use this but don’t actually live and breathe it internally. We have gone a step further and are now a “people-led” agency, led by the staff that helped build the company to where it is today.
  • Everyone gets rewarded: Through a traditional sale, the team that has helped to build the company don’t get any benefits from the sale. The founders, and a select few with shares, benefit from any dividends/rewards from a sale, while the staff are left with the transition to a much larger company often with a completely different culture.
  • Longevity: The longevity of the business is maintained as with so many incredible independent agencies of the past that are now non-existent after they’ve been absorbed into their parent company. This way, NOVOS can live on for longer as both Sam and Antonio continue to support its growth.

What does this mean for clients?

Our staff have always given their all for our clients that match our values.

Becoming EO just means this love and care is taken to a new level. The staff directly benefit from client retention and growing the account inline with client performance. Our team benefits directly from our success, so they really care about keeping clients happy!

In general, many agencies have a serious issue with retention, even more so in digital agencies. We’re predicting that the EO change will help NOVOS to retain senior talent even stronger than we do now, again having a positive impact on clients.

Additional benefits we predict for our clients are:

  • More togetherness amongst our team, which will make them even more motivated to be the absolute best and ahead of every competitor.
  • We’re not selling to an external party or being acquired, so no going through major changes that we see every agency do, and you’ll never have to experience that with us.
  • Morale and enthusiasm will be up further for everyone in our team because they have more skin in the game, so therefore will go even more above and beyond for the business as they’re owners now as opposed to treating it as a standard job.

What does this mean for staff?

We’ve always been generous with staff benefits. Existing benefits have involved quarterly bonuses, unlimited holiday, physical and mental health benefits, and other general perks.

We’re always focused on keeping staff happy which, in turn, helps to keep clients happy. The majority of our new business leads come from existing client referrals which shows this approach has worked.

With the EO takeover these benefits will only multiply, resulting in happier, even more rewarded staff which will help with client happiness, satisfaction, and referrals.

In short, if the company continues to do well, the staff will benefit from taking the majority of the agency profits (with some kept behind for investment and management of cash flow).

Beyond the financial gains, staff will also get a considerably larger voice in the direction and decision-making of the company. Through the People Committee; ideas, suggestions and issues will be fed up to the Trust and implemented into the running of the agency.

Staff will also contribute to the overall agency strategy and direction.

What will change day to day?

As we’ve always been operating as a people-first agency, not a massive amount will change day to day.

Initiatives like our think tank model & employee happiness tracking are already in place so we will continue to use these to get staff feedback and ideas into our wider business strategy.

2 main short-term focuses would be to set up the Trust internally and also to nominate 4-6 new members to the People Committee.

What about the founders? 

Antonio and Sam will both continue to run the day-to-day of the business.

We’ve worked hard over the last 3 years to move ourselves away from the delivery of client work to just focus on business growth and quality of delivery.

We’re in a good position now to continue to focus on the business while our leadership team and senior management team focus the on day-to-day running of client accounts.

An EO also means we’re not going away any time soon. EO gives us the platform to maintain the agency for the next 10+ years.

We created NOVOS to be truly different to the other agencies in the industry. Becoming an EO company further enhances this vision.

We’re both very confident that the people who helped to build this multi-million pound agency are the right people to lead it to the next level of growth.

www.gawdo.com

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