Exploring a path to employee ownership is exciting, yet overwhelming. We’ve found that many business advisors, business owners, and leadership teams work well with a structured approach.
And typically, the first step in deciding to venture down the employee-owned (EO) path is a simple one: Conducting a feasibility study. This is a testing ground to see if you are even in a position to begin such a process, and if so, how to proceed. If not, it can also show you the changes that need to occur before you can make EO a reality.
But what is a feasibility study? Who does them? And what type of information can you expect to come from the process? Let’s dive in to provide you with the information you need most.
What is a Feasibility Study?
A feasibility study is your chance to understand where things stand, what may need to be done to prepare for your own departure (or even change in role or magnitude), and how you can take the steps toward the future you want for your company.
A feasibility study typically involves multiple steps. Each is an important evaluation of a different aspect of the business. These steps often include:
- Leadership assessment
- Operational assessment
- Stockholders’ equity analysis
- Plan design outline and tax implications
- Liquidity study
Depending on your individual business, these steps may slightly vary. But overall, you can think of the study as a sort of “check-up” to see how “healthy” the business is, where there may be needs for change, and how ready it is for a sale or change.
Who Conducts Feasibility Studies?
A feasibility study is best done by an outside party who can guide the questions and assessments based upon which model of employee ownership the owner is seeking. Often, service providers who do conversions can offer low or not cost studies.
How Can You Prepare for a Feasibility Study?
No matter who conducts your study, you will want to have all information at the ready. While solid advice at any point in owning or operating your business, one of the best ways to prepare for a feasibility study (and be “conversation-ready”) is to simply have your ducks in a row. Paperwork should be clearly labeled, filed, and organized. All financials should be easy to understand, cleanly compiled, and accurate. Create an organizational chart showing leadership positions and responsibilities, and be prepared to answer questions about your goals and timeline.
What if I’m not “conversion ready”?
There are many free services available to support businesses. In North Carolina, your first step could be to reach out to your local SBTDC office. You will be paired with an experienced counselor who can assess your needs, lay out a strategy and timeline and help you achieve your goals.
Resources for a feasibility study
Sometimes you just need that extra helping hand when it comes to understanding your future options. In addition to our variety of resources, we also aim to arm you with the best tools possible.
The National Center for Employee Ownership (NCEO), for example, has long been a source for feasibility structuring, understanding your readiness for these steps, and even how and who can assist you in conducting them. They have resources that can help you calculate everything from tax advantages to how an employee-ownership program may work for you.
We also offer an assortment of experienced professionals within the North Carolina Employee Ownership Center that you can speak with at any time. We’re here to guide you through all steps of the process, no matter what you choose to do moving forward!
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