An Interview With Chad Silverstein
A formal valuation or business appraisal to determine the fair market value of the business. This value must align with the financial needs of the owners, and the long term sustainability of the business.
The global pandemic has forever altered the landscape of sales, propelling us into the era of remote selling. Today, businesses and sales professionals face the challenge of connecting with clients and closing deals without the traditional in-person interactions. Mastering the art of remote selling has become not just an advantage but a necessity. From leveraging technology and digital tools to building trust and rapport over virtual platforms, the skills required for effective remote selling are evolving. I had the pleasure of interviewing Mike Cassata, Business Owner Advisory Strategist at Rockland Trust.
Mike Cassata’s key focus as Rockland Trust’s Business Owner Advisory Strategist is to provide guidance and support to business owners, ensuring they are well positioned to internally transfer, or sell to an external suiter when the time is right. As a former business owner turned investment banker, Mike has over 20 years of experience supporting business owners’ transition their organization into the next stage. Mike is a Certified Exit Planning Advisor, a FINRA-registered securities professional holding a Series 63, 79, and 24 regulatory designation, and received his BS in Electrical Engineering from the University of Connecticut.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a little bit about you. Can you tell us about your ‘backstory’ and how you got started?
There are two parts of my career — the first half, I co-founded a software company. As we scaled our business, we attracted interest from a publicly traded company, which eventually became its acquirer. The second half of my career, I became a buyer and seller of businesses. It was then that I realized there has to be a better way for business owners to prepare or ready their business for a successful transition. Businesses that want to sell need more than a task manager — they need an advisor that takes a holistic view to make their company both attractive and ready for sale.
I joined Rockland Trust in 2023 to create a service that helps our business owner customers through the entire transition process, ensures they are aware of the various options available to them when they are ready to transition their business and is available when they require insights and guidance as they undergo this major financial decision.
How would you describe the culture at your company and what has been the biggest contributor?
Relationships matter at Rockland Trust, and it’s central to our culture and mission. Every employee embodies this mantra in interactions with customers and colleagues. We all want to make a positive impact that helps our customers — whether they are consumers or businesses — reach their financial goals.
How would you explain what an ESOP is to someone who has never heard of it before?
Employee Stock Ownership Plans (ESOPs) are unique retirement plans that allow employees to become partial owners of a company. An ESOP allows a business owner to transfer ownership tax efficiently. ESOPs are regulated under the US Department of Labor and must adhere to the Employee Retirement Income Security Act (ERISA) laws. For some business owners, this is an attractive succession planning tool since it keeps the business in the hands of people the owners know and trust. In turn, they reward important stakeholders for their performance and loyalty while maintaining the legacy and stability of the business.
Looking back, what was the catalyst that made you start thinking about transitioning to an ESOP?
For those businesses that qualify, I advise business owners to consider ESOPs as part of their succession and exit planning. Some businesses — like business services, construction, manufacturing, and mechanical contractors– are prime candidates for an ESOP, especially if the businesses with at least 25 employees and with a minimum of $2.0 MM in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). For C-Corporations, the tax advantages for the business owners are potentially significant.
Was there ever a point you doubted the ESOP route? What kept you motivated to push through those challenges?
Well in a word, yes. ESOPs can be a powerful tool for fostering employee engagement, and providing another significant retirement benefit. However, careful consideration, planning, and ongoing management are essential to ensure success. A business owner must retain a specialist firm that assesses the feasibility of an ESOP, as well as providing the ongoing annual valuations and ESOP administration. Business owners should weigh the potential benefits against the complexities and costs. My role is to help business owners consider the ESOP option as well as other transition strategies to be able to make the correct decision by weighting the pros and cons.
ESOP companies often have a distinctive culture and operational approach. What makes your company stand out from others, thanks to the ESOP structure?
Businesses that transition from closely held to an ESOP structure gain the advantage of formal governance administration. This governance requires regular communication to the shareholder employees. Effective communication and education programs are crucial to ensure employees understand the company’s strategies and plans, and how each employee contributes to its success. This formal communication and education improves awareness of the business operations, creates greater participation in decision-making, creates more job security and satisfaction, and increases trust in the company and management. It creates an inclusive culture and a sense of shared accomplishment.
Great. Now, let’s dive into the heart of our interview. The transition to an ESOP involves a lot of challenges and opportunities to learn. Could you list the top “Five Things You Need to Successfully Leverage the Power of ESOPs”?
1. A feasibility study to ensure the company is suitable to form and operate an ESOP.
2. A formal valuation or business appraisal to determine the fair market value of the business. This value must align with the financial needs of the owners, and the long term sustainability of the business.
3. Annual third-party legal, valuation, compliance, and administrative fees associated with the administration of the ESOP.
4. Regular meetings with the employee participants in the ESOP to share insights about the business operations, financial results, and ongoing education about the ESOP.
5.A diverse employee shareholder base with a range of retirement dates is essential. A foreseeable timeline will help maintain a balance between cash flow needs as employees plan for and retire from the business. A steady stream of cash flow is required to meet future repurchase obligations of the ESOP.
Financial literacy is crucial in an ESOP for employees to understand the value of their shares and how their actions impact the company’s success. What initiatives have you taken to educate your employees about financial aspects and the workings of the ESOP?
Shareholders need to feel confident in management’s ability to grow the business. A steady reporting cadence is important to build trust. A combination of financial and non-financial metrics are useful. The financial metrics are important and necessary. I suggest that the non-financial metrics may be more meaningful, and these can be tied to performance factors closer to the employee’s daily work. The impact is measurable and satisfying to the employees as the metrics improve as a result of their efforts. Providing a way for management to show their appreciation for the efforts made to improve performance. Posting these non-financial metrics in accessible locations brings these to daily life and focus across the organization. Incorporating the non-financial metrics into the financial reports will create a connection and bring association to how daily activities impact the financial performance of the business.
Employee ownership often changes the dynamics of engagement and participation. How have you seen employee involvement evolve in decision-making and daily operations since transitioning to an ESOP?
It is empowering to employee shareholders to actively engage in the business. As an illustration, if the HR recruiting budget skyrockets, management can provide a report so employees can see it’s because of the high employee turnover rate and related cost (in time and resources) of hiring. By lowering employee turnover or increasing retaining employees reduces the cost to hire and train a new employee. Same is true of customer losses, a non-financial metric indicating the portion of customers who remain customers for an entire reporting period improve profitability due to lower sales costs, and more purchases across the customers organization. Another example, tracking the number of support requests allows the organization to not only compare month to month changes, but also the impact on customer losses versus retainage. Providing employees with these non-financial metrics increases their level of commitment to the company and empowers them as owners.
Company culture and the ability to attract top talent are critical factors for business success. How has adopting an ESOP model impacted your company culture and your approach to recruiting and retaining employees? Do you believe the ESOP model has given you an advantage in the labor market?
As the adage states, culture beats strategy. While strategy is important to a business, its culture determines how well the employees, acting as shareholders, actually align interests to execute the company’s strategy and the pace of the execution. An ESOP structure fosters a culture of involvement and achievement. It is also true that a company’s culture drives outputs and becomes the default strategy when a specific strategy is not well defined. The corporate discipline that is required to run a company that operates as an ESOP should empower employees in a shared mission and create a positive work culture. Both strategy and culture relate to the values, beliefs, and behaviors of employees, and when well-built, they may provide a competitive advantage to the organization.
How can our readers further follow you or your company online?
For advice about starting and managing a business, check out the Rockland Trust Learning Center. You can also follow us on social media: LinkedIn, Facebook, Instagram and X/Twitter.
This was great. Thank you so much for the time you spent sharing with us.
About the Interviewer: Chad Silverstein, a seasoned entrepreneur with over two decades of experience as the Founder and CEO of multiple companies. He launched Choice Recovery, Inc., a healthcare collection agency, while going to The Ohio State University, His team earned national recognition, twice being ranked as the #1 business to work for in Central Ohio. In 2018, Chad launched [re]start, a career development platform connecting thousands of individuals in collections with meaningful employment opportunities, He sold Choice Recovery on his 25th anniversary and in 2023, sold the majority interest in [re]start so he can focus his transition to Built to Lead as an Executive Leadership Coach. Learn more at www.chadsilverstein.com
Mike Cassata Of Rockland Trust On Why ESOPs Are an Attractive Choice for Business Succession was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.