The United States is on the cusp of a significant economic transition, with an estimated six million ‘baby boomer’ business owners poised to retire by 2035. This impending ‘silver tsunami,’ as dubbed by some commentators, is creating a ‘once-in-a-generation wave of ownership transitions,’ according to a report from business consulting firm McKinsey. While traditional sales to external buyers or private equity firms remain common, a growing number of entrepreneurs are opting for a less conventional, yet increasingly appealing, exit strategy: selling their businesses to their employees.
The Growing Trend of Employee Ownership
This shift is exemplified by companies like Softstar Shoes in Oregon, where staff gained ownership in January. Former sole owner and chief executive Tricia Salcido, 56, chose to sell to her 30-strong workforce as she plans for retirement. Salcido observes a ‘newfound enthusiasm for eking out resources and growing profits’ among her now-owner employees, noting, ‘I’m getting personal emails from employees saying, ‘well, have you thought about this idea?” These ‘business insights that weren’t forthcoming before’ highlight a key benefit. One 2025 study indicated that up to 600 US firms are now being sold to their workers annually. Supporting this trend, investment funds available to finance such deals surged 78% last year, reaching $865 million from $500 million in 2024, signaling increased market activity in this sector.
Motivations Beyond Financial Returns
For many retiring owners, the decision to sell to employees is deeply rooted in a desire to preserve their legacy and protect their workforce. Tricia Salcido, for instance, was convinced that a cost-cutting corporate buyer would move her firm’s artisan shoemaking out of the US. ‘It’s something you put your life’s work into… most small business owners really care,’ she explains. This sentiment is echoed by William Stockwell, who sold Stockwell Elastomerics, a Philadelphia-based industrial components manufacturer founded by his great-grandfather in 1919, to his employees. Stockwell witnessed the negative impacts of external buyouts, stating, ‘The new [outside] ownership might move the business, they might shut it down, or drastically change it in other ways, and the people remaining are stuck.’ Ethan Rouen, associate professor at Harvard Business School, notes that such a move ‘often appeals to owners who care deeply about their employees, and worry about what would happen following a sale to a larger company or private equity firm.’
Mechanisms of Employee Ownership
The US offers several structured pathways for employee ownership. Softstar Shoes utilized an Employee Ownership Trust (EOT). Under an EOT, a trust is established to own the business on behalf of the staff, eliminating the need for employees to purchase shares directly from their own pockets. The former owner then receives the agreed sale price in installments, paid as a share of future profits. This model means Salcido ‘carry[ies] the risk, in that if anything happens, I don’t get paid,’ but she expresses faith in her team. Employees also receive a share of annual profits.
William Stockwell chose an Employee Stock Ownership Plan (ESOP), the most common method for such transitions in the US. ESOPs also place the business under trust ownership, but instead of sharing annual profits, staff acquire shares that can only be cashed in when they leave the company. Like EOTs, the retiring owner receives payments over time; Stockwell acknowledges making a ‘short-term financial sacrifice’ by accepting payments over 10 years. In 2023, the most recent year for which data is available, there were 6,609 companies operating under an ESOP structure, employing 10.9 million people and holding combined assets exceeding $2 trillion (£1.5 trillion). A third, less common method is the worker co-operative, where workers directly purchase a share of the business.
Benefits and Challenges
Research consistently demonstrates that employee-owned companies can be more productive, exhibit a lower likelihood of staff redundancies, and tend to pay higher wages. Beyond these operational advantages, employee ownership democratizes wealth creation. Harvard’s Rouen asserts, ‘The only way to truly create wealth in this country is through ownership of capital. And this is a way to democratise that.’ He also notes its appeal to younger workers ‘disillusioned’ by traditional corporate structures.
However, these schemes are not without their complexities. Both EOT and ESOP structures are ‘undoubtedly more complex to set up than a simple, traditional sale,’ which, combined with the longer wait for payment and increased risk for the seller, can deter some owners. A significant hurdle is also a general ‘lack of awareness that the schemes even exist,’ as Salcido points out. Paul Silvis, 71, in the process of selling his manufacturing business SilkoTek Corporation to his employees, is confident in his decision, but William Stockwell cautions that owners must ‘start planning early for a process that could take years. It’s not something you want to begin the year you want to retire.’
Despite the inherent complexities and the need for meticulous early planning, the landscape for employee ownership is evolving favorably. Ethan Rouen highlights growing political will in Washington to simplify the process, with the US government actively encouraging it through initiatives like the Department of Labour’s new Employee Ownership Initiative. Bipartisan support in Congress aims ‘to figure out ways to make [selling up to staff] an easier and more realistic option for business owners.’ This concerted effort suggests that the coming years will likely witness ‘more successful employee ownership conversions,’ offering a robust and socially conscious alternative for the millions of US business owners preparing to transition their life’s work.
