My learnings of running an employee owned business

I’ve written previously about our experience of selling NOVOS and becoming an employee owned business.

For this post i’ll focus more on the first year of being an employee owned business and how reality compares with my expectations of the model.

Profit-led

Firstly the model does change your mindset to running the business. As the founders and staff all get shares of the profit maximising your margins are essential. £1-2k saved over a 12 month period could mean a 10-20% increase in some staff members profit shares, a sizeable amount for junior members of staff.

As a result, if you are super profit led naturally this doesn’t mean too many big investments in new initiatives eg new services, new markets or taking risks with big hires.

We are only in our first year so this mentality may change in the future but for now our aim is to be as lean as possible to protect our margins. In contrast around 2/3 years ago we were investing over £120k of the cash in the bank to launch our Digital PR services and hire senior talent to lead that team.

Right decision

In terms of reflecting on our decision and the different avenues we had to sell the business it was 100% the best decision we made for us. It aligned with our values and meant we could still maintain a large amount of general day to day control.

There’s pros and cons to getting the money out of the business and if you are in the mindset that you want out of the business asap and want to move on then the EO route isn’t right for you. It takes much longer to get the actual money owed to you but again this was fine for me as we sold very early on in our journey so myself and my business partner were still in it for the long run.

Selling to the team

Despite everyone knowing we’re an employee owned business we do need to keep highlighting it and ‘re-selling’ the concept to the team each quarter. This didn’t align with my expectations as I just thought we’d announce it once and that was enough.

I think overtime the longer we’re an EO the more EO processes and ways of working will get embedded into our general operations of the agency. Once thats in place we won’t be needed to do as much selling or education but for now we’re still just over a year in and these things take a long time.

Staff retention

I thought the EO model and tax free bonus’ would have helped with staff retention more but our staff churn is largely the same as what it was pre-EO. Ultimately if someone wants to leave to switch careers or move in-house a business model like this still isn’t enough to sway the decision to stay.

Its a much better model for retaining senior talent as they’ve worked at agencies in the past and know how much hard work it is with little returns. Seniors that stay with us the longest will naturally get a larger percentage of the profit share and are in a better position to see the impact of their work on the bottom line.

Client Acquisition

The model does have a strong impact on converting new business. I had 0 expectations that the model could help with new business. Many agencies struggle to have a strong USP and the EO model definitely adds to the differentiation away from other competitors in the pitching process.

In conclusion, the first year of being an employee-owned business has brought both expected and unexpected changes. Prioritising profit and being cautious with investments protected our profitability but limited new initiatives. The model hasn’t significantly improved staff retention, except for senior talent. However, it has had a strong impact on converting new clients and differentiating us from competitors. Moving forward, we expect the employee-owned processes and mindset to become more ingrained in our agency’s operations.

Ultimately, becoming employee-owned has shifted our mindset and priorities. Challenges remain, but we believe in the long-term benefits for our team and agency’s success and was undoubtedly the best decision we made. The longer term vision is to make NOVOS an employee-led business, we’re still a long way from that vision. I’ll be sharing the progress we make over the next few years so be sure to add your email address below or just message me directly if you have any questions about the model.