IS PURPOSE TRUST OWNERSHIP THE RIGHT FIT FOR YOUR COMPANY?
For the past 50 years, company ownership structures that have prioritized profit above all else have ruled the day, and the world.
We have seen some of the results of that failed experiment – extreme inequality, runaway climate change, the rise of unregulated monopolies, environmental degradation, and more.
Luckily, there are alternatives for innovative companies that want to do it differently. Today, we want to highlight one exciting ownership structure that has the potential to transform your business forever – Purpose Trust Ownership.
Answer the four questions below to see if Purpose Trust ownership might be a good fit for you and your company.
1. Does your businesses have a strong mission and purpose at the core of its operations, culture, and brand value proposition?
Steward ownership promotes the idea that companies can and should have a reason for being that is rooted in purpose and that serves a broad range of stakeholders. So, if you have a clear picture of WHY your company exists, HOW your operations further the existence of that mission/purpose, and WHO your company exists to benefit (your stakeholders), then Purpose Trust ownership might be right for you.
2. Do you care deeply about protecting your legacy and the company's ongoing mission-driven operations? Is legacy more important to you than maximizing exit-value? Is part of your legacy finding ways to honor and share with your stakeholders?
It’s natural for owners to want to receive a fair value for their sweat equity when they exit their business. How people define fair value, however, can vary widely. Those contemplating Purpose Trust ownership may need to consider some potential trade-offs, including:
- Taking a discount compared to what you could get in the open market
- Getting paid out over time, rather than all at once
- Keeping some of your ownership in the company
- Subordinating the rights of your shares to new investors
What these owners receive in return is the knowledge that their legacy is protected. That the business is no longer a commodity that can be bought and sold and that the founding mission will continue to guide the ship, long after they are gone. That their stakeholders will be taken care of and included into the future—whether that is sharing profits with employees, fair returns to suppliers, or making significant contributions to the community. If you’re willing to potentially leave a little on the table to protect your legacy, then Purpose Trust ownership might be right for you.
3. Do you have a credible business model and strategic plan; a track record of financial viability, and the capacity to adopt effective internal governance and management systems?
Companies that require financing to transition to Purpose Trust ownership need to be financially viable. They need to demonstrate the ability generate sufficient positive cashflow to pay back the founders and/or investors over time. They need to demonstrate that meeting those obligations won’t cash-strap the business to the extent that they are unable to invest in improvements and innovation to remain viable and to weather market challenges. They need a solid leadership team, a strategic plan that speaks to how they will compete, and internal governance and management systems that give confidence to key partners (founders, employees, customers, lenders, investors). In short, if your financial house is in good order, your company may be a good fit for Purpose Trust ownership.
4. Do you have leadership ready to steward the enterprise into the future?
How deep and strong is your bench? Have you been intentional about building a leadership team and company culture that is aligned with not just how you run the business, but the why behind everything you do? Have they demonstrated the ability to balance purpose and profit? Do you have faith that they will they be able to rise to this challenge? If the answer is yes, then your company may be a good fit for Purpose Trust ownership.
