ABRC-ESOP
Tuesday, February 19, 2008
ESOP Fees
A recent article in the Wall Street Journal titled "Sale Gives PR Firm the Benefits of Becoming Employee-Owned" Sale Gives PR Firm the Benefits of Becoming Employee-Owned caught my eye. It seems the owner of a 17-person firm wanted to sell his company to his employees. The owner had decided an ESOP was the best way to go, until he learned the cost of the installation, which was upwards of $100,000!
The kind of fees discussed in the article is quite exorbitant. This might explain why there were 120 new ESOP plans installed in 2007. Most ESOP providers are not interested in providing services to smaller companies or are interested in doing so only at big-company fee rates. The small business segment is under-served for several reasons, but the main reason is this: Most firms do not specialize in doing just ESOPs. Since ESOPs are just a minor portion of their total business, doing a smaller company ESOP is not cost-effective for them. They are unable (or unwilling) to scale their fee to the size of the company.
Can a small company afford an ESOP? Yes, if you work with an ESOP consulting firm that focuses 100% on ESOPs, whose pricing structure is scaled to fit the number of employees, and one that charges a flat project fee (not hourly) so there are no surprises. Doing it this way helps ensure you pay only a fraction of the $100,000 quoted in the article.
The kind of fees discussed in the article is quite exorbitant. This might explain why there were 120 new ESOP plans installed in 2007. Most ESOP providers are not interested in providing services to smaller companies or are interested in doing so only at big-company fee rates. The small business segment is under-served for several reasons, but the main reason is this: Most firms do not specialize in doing just ESOPs. Since ESOPs are just a minor portion of their total business, doing a smaller company ESOP is not cost-effective for them. They are unable (or unwilling) to scale their fee to the size of the company.
Can a small company afford an ESOP? Yes, if you work with an ESOP consulting firm that focuses 100% on ESOPs, whose pricing structure is scaled to fit the number of employees, and one that charges a flat project fee (not hourly) so there are no surprises. Doing it this way helps ensure you pay only a fraction of the $100,000 quoted in the article.
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