When a big business buys a beloved brand then changes the product, lowers the quality, or shutters the company altogether, consumers aren’t the only ones who feel the sting — the founders themselves often regret selling.
Many founders in the beauty and fashion spaces have said they regret selling their successful brands to bigger companies, and they aren’t alone. According to Common Trust, which helps business owners exit their brands with purpose through an Employee Ownership Trust (EOT), research has shown that as many as 75% of business owners regret selling their company within a year.
“Whether you’re a business leader mulling over succession plans and engagement strategies, or you’re an owner who wants to lead a values-driven business for decades to come, employee ownership is worth considering,” says Zoe Schlag, co-founder and managing partner of Common Trust. “Even if they never hold a C-level or senior management title, staff with an upside stake in the business are likely to feel more invested in and aligned with your organization’s future success.”
Cycling apparel brand Kitsbow transitioned to majority employee ownership in 2022. W.L. Gore & Associates, the maker of Gore-Tex, is one of the largest employee-owned manufacturing companies in the U.S. Fashion designer Eileen Fisher began transitioning her fashion empire to employee ownership nearly 20 years ago.
“Once we started having extra profit, the first thought was share it with the employees. They do all the work, it’s only fair to share, which I think all companies should have to do,” Fisher told CNN’s Poppy Harlow during a 2020 episode of the “Boss Files” podcast.
Fisher pointed out that employee-owners “speak up more when they see things that don’t feel right or if people are wasting money,” and even billionaire “Shark Tank” investor Mark Cuban agrees.
“Even if it’s a small private company that may never grow big, if you’re a dry cleaner, share,” Cuban said in a 2020 interview with LinkedIn editor-in-chief Dan Roth. “Your employees will work harder. They’ll recognize that they’re an owner. They’ll have a completely different perspective.”
Common Trust says EOTs offer a high-performance, legacy-aligned pathway to keep beloved companies in business long-term. EOTs offer a more cost-effective and streamlined alternative to the more common Employee Stock Ownership Plans (ESOPs), which require substantial investments and complex governance.
Common Trust helped Clegg Auto become the first EOT in Utah back in August 2022, and a year later, its profits doubled under employee ownership.
Brothers Kevin and Steve Clegg were previously the majority owners of the group of four auto repair and body shops, which have long been known for high-quality customer service. Their transition to a single-employee-owned company structure became the first EOT holding company in the U.S, with all 55 employees participating in profit sharing and governance.
Common Trust worked with the Clegg team to build a custom Employee Ownership Trust designed to protect key company values and the long-term welfare of employees and provided capital for the sale through its sister fund. Much cheaper than an ESOP, the EOT model allows owners to get cash out on day one, with competitive sale pricing, tax advantages, and long-term upside for management.
According to Common Trust, simplicity is a boon for small businesses, allowing them to devote resources to growth and innovation rather than administrative overhead.
The company said Clegg Auto’s transformation stands as evidence of the “ownership flywheel” effect, where employee empowerment fuels motivation and drives performance.
And when times are good, profits can soar, as Clegg Auto shows.
“We had our best quarter in company history after becoming employee-owned,” said Kevin Clegg. “And this last quarter we nearly doubled those results again, as well as hit our highest-customer satisfaction metrics since the company was founded.”
TMX contributed to this story.
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