ABRC-ESOP

One question that comes up regularly at employee meetings I've attended has to do with how employees can make a positive impact on the stock value of their company.

In ESOP companies, the company stock must be appraised every year by an independent valuation expert to determine the "fair market value" of the stock.

The methods that the appraiser uses can be complex, but the logic is simple: What would someone pay for a share of stock in the company? Some factors can be influenced by employees and some can not.

WHAT FACTORS WILL AFFECT STOCK VALUE IN AN ESOP COMPANY?

• Taking On New Company Debt :
  
  We know that taking out a loan will have a negative impact on the value of an ESOP company. Much like a home mortgage, the asset is worth less until you build up equity by repaying the loan. While the typical employee of an ESOP company will not make strategic decisions to repay debt, they can help generate the cash needed to make the loan repayments to build the value up.
• S Corporation Status:
  
  As a 100% ESOP-owned company that has elected S Corp. tax status - the company will not pay taxes on any of the profits earned. Those former tax dollars can be reinvested to grow the business. The performance of all employees on the job can multiply the advantage of this tax status.
• Productive Use of Time:
  
  Avoiding rework, starting on time, having the right people do the right jobs, and doing the job more efficiently can have a powerful impact on the stock value in an ESOP company.
• Safety:
  
  Safety is something that employees have much more control over than ESOP company leaders - and it can have a tremendous impact on the stock value of an ESOP company. By following safety procedures, an ESOP company can avoid the cost of accidents and non-productive time.

posted by evan@abrc-esop.com  # 10:51 AM