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Community Owned Businesses – The Journey

There is growing recognition of the value of community businesses, preserving community assets and generating economic value for their communities. COVID-19 has clearly demonstrated the importance of supporting communities to be innovative and take the step towards generating wealth locally, avoiding the return to normal economics.

Community imageIn partnership with the Plunkett Foundation, and Community Shares Scotland, Co-operative Development Scotland ran their second Community Business: Making it Easy event this month providing key insight to the realities of establishing a community business and information about the support available.

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Employee Ownership is the way forward for civil engineering consultancy MHB

Civil engineering firm MHB Consultants has become employee-owned, with 40 members of staff given a stake in the business.

Founded by managing director Hendrie Barbour in 2006, MHB Consultants is an engineering design consultancy specialising in bridge design, civil and geotechnical engineering, temporary works and land surveying. Together with fellow directors Fergus Aitchison and Alistair Gray, Hendrie has grown the firm organically to 40 staff, with headquarters in Glasgow and regional offices in Edinburgh and York. Clients include construction firms, transport agencies, local authorities, engineering consultants and private clients throughout the UK.

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Key advice for setting up a community business

Earlier this year Co-operative Development Scotland were part of a group that organised and hosted an event called Community Shops & Pubs: Making it Easy. The event was designed to enable communities take action to secure the future of their local shop or pub by helping them to better understand what projects of this nature entail and the support that is available to them. This was a fantastic event was well attended by community groups from across Scotland who were able to access advice on fundraising, governance and community engagement. Attendees also had the opportunity to speak to those already running community businesses and to learn from their experience.

On the day we caught upGillian Kirton with some of the speakers from the event to find out what key bits of advice they would give to community groups considering setting up their own community business.

Gillian Kirton, project manager for Co-operative Development Scotland was there on the day and shares some of the key insights.

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Co-ops Fortnight 2020

Portrait of Darah Zahran, Social Economy Manager at Scottish Enterprise. Taken 22-03-19

Over the next two weeks we join our partners in celebrating Co-ops Fortnight. COVID-19 has left us facing extreme challenges for both public health and our economy, but positive lessons are being learned during this crisis, and we all want to harness this new culture of co-operation to change society for the better. Looking at this year’s theme of #KeepCooperating we caught up with Darah Zahran, team leader at Co-operative Development Scotland to get her take on why co-operatives will play a key part in our economic future.

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Introduction to community co-operatives

Suzanne OrchardAs our thoughts turn to what our economy will look like post COVID-19, there are calls not to return to business as usual. There is an opportunity to create a fairer and more democratic alternative to what we’ve had in the past and community wealth building and co-operative business models will play a key role in that.

In our latest blog, we catch up with Suzanne Orchard, our specialist advisor for co-operatives to find out more about community co-operatives and why communities in Scotland are turning to this model to both safeguard vital local assets but also to generate economic benefit for the areas they live in.

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A Message From Co-operative Development Scotland

As we feel the unprecedented effects of COVID-19, the team at Co-operative Development Scotland want to offer our support in this incredibly difficult time to our clients.

The changes we have seen to every aspect of our lives at the moment may be overwhelming, but we would like to do what we can to help you with the immediate challenges your business or co-operative may be facing by signposting to the network of support available from the government and key partners. Links and details about support available are listed below.

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Celebrating women in employee ownership

Angela Wardrope hi res

Research carried out by Women’s Enterprise Scotland shows that the contribution made by female-owned businesses to the Scottish economy continues to grow. The GVA of the sector grew from £5bn in 2012 to £8.8bn in 2015 – a 76% increase – while it is now responsible for creating 231k Scottish jobs – up from 153k in 2012.We have also seen a rise in the number of female-fronted businesses in the employee ownership sector, with several of the businesses transitioning to employee ownership being owned or run by women.

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Five Steps to Collaboration

Collaborating with others can be a highly effective way for a business to drive growth and innovation whilst sharing the associated costs and risks.

However, when it comes to forming or joining a consortium, what should a business consider? How does the process work and what are the specific benefits that can be delivered?

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STORNOWAY MEDIA PRODUCTION COMPANY MACTV BECOMES EMPLOYEE-OWNED

Stornoway-based production company MacTV recently joined the growing number of employee-owned businesses in Scotland, with 18 employees given a stake in the business.

Established in 2001, award-winning MacTV is the largest independent TV company in the Highlands and Islands. Specialising in factual documentary, arts and music programmes in both Gaelic and English, the company is one of the biggest producers of programming for BBC ALBA. Its main production base is in the Hebrides, with staff also in the central belt, and in recent years the company has also been involved in a variety of international co-productions, working with companies in Canada, Ireland, Iceland and Wales.

When managing director Bill Morrison began to look ahead to his retirement, there were a number of considerations, including a preference to try and ensure that the business remained based in Stornoway, and that the company’s positive community ethos and culture remained at its core. Bill identified employee ownership as a potential ideal solution, and he subsequently got in touch with Highlands and Islands Enterprise to explore the option in more detail. From there, he was introduced to Co-operative Development Scotland.  We caught up with Bill to find out more.

MacTV Group 1

“In the 18 years since it was established, the hugely talented and hardworking team at MacTV has helped build a highly regarded production company which is recognised at both a national and international level for producing important and compelling programming with Scotland’s unique spirit at its heart. With a workforce truly rooted in the community, the passion, skills and local knowledge of our staff is vital to the quality of our output.

“A traditional trade sale may have seen us bought by a competitor, potentially risking job security and compromising our offering. Employee ownership ensures that the company is owned by and run for the benefit of those most close to it, while providing ongoing economic benefit to the area by anchoring the work and jobs in the local community. Our new employee owners now have an increased stake in their own future, with a say in the business, empowering them to shape its direction and drive growth.”

An Employee Ownership Trust has been formed which will hold 90% of the shares on behalf of the employees. The process was managed by 4-consulting, with legal services provided by Blackadders and accountancy support from Mann Judd Gordon.

If you have a question or you want to talk about how employee ownership can help you, please get in touch with us here using the ‘expert support’ option.

GLASGOW CARE FIRM ASPIRE STRENGTHENS COMPANY ETHOS WITH EMPLOYEE OWNERSHIP

Glasgow-based care provider Aspire recently joined the growing number of employee-owned businesses in Scotland, with 186 social care employees across the organisation being given a stake in the business.

Aspire provides a range of services including Self-Directed Support, Intensive/Complex Home Care, Homelessness Emergency Accommodation and Resettlement, Alcohol-Related Brain Injuries Housing Support, Care at Home, Criminal Justice and Young Care Leavers Services. Since 2011 Aspire has annually won a raft of Scottish Care National Awards.

Aspire was established in 2002 by Peter Millar, who has over 47 years’ experience in social work and community care including planning, commissioning, senior management, and developing and delivering services within Local Authorities and the NHS in Scotland.  We caught up with Peter to hear more about his decision to sell the company to its staff.

Portrait of Aspire Chief Executive Peter Millar.

“Employee ownership is wholly consistent with Aspire’s ethos and values.  We are all about empowering people to achieve a better life and a more self-directed and optimistic future. Whilst that approach fundamentally underpins our work with the individuals we have the privilege of working alongside and supporting in the community, it is also highly applicable to our relationship with our employees. 

Employee Ownership enables us to elevate the status of our employees, enhance their opportunities to be more involved in contributing to the growth and development of Aspire, and allows all of those employees to equitably share the benefits from Aspire’s future successes.

“Employee Ownership therefore provides Aspire with a stronger, more inclusive, collaborative and equitable model. In addition to giving all employees a real stake in the organisation, it also secures Aspire’s position as a high quality provider of social care services in Scotland and an organisation that consistently makes a positive difference to individuals’ lives and to their local communities.

“I’m delighted that Aspire Housing and Personal Development Services is in the hands of our committed and highly talented team who have been overwhelmingly positive about this important development for our organisation and are now even more enthusiastic about it. We have a superb senior management team and excellent employee trustees and staff and we are all really excited about the future.”

Staff at Aspire

Some of the Aspire team

Aspire now has a Trust board which includes two elected employee trustees, Euan Jessiman and Cameron Gilchrist.

Cameron added: “On behalf of the whole team, I’d like to give a huge thanks to Peter for giving us the amazing opportunity to share the ownership of Aspire – which has such a positive impact on so many lives – and there’s something very meaningful, for both the whole team and the people we support, in becoming employee owned.”

If you have a question or you want to talk about how employee ownership can help you, please get in touch with us here using the ‘expert support’ option.

SECURING THE FUTURE OF FAMILY BUSINESSES

For family businesses, planning for succession is one of the biggest challenges they will face and an effective succession solution is critical to their long-term success. While research indicates that approximately 73% of family businesses want to keep the business in the family, this isn’t always possible. Only 12% of family-owned businesses in Scotland are passed down to the second generation and just 7% remain in the family for three generations or more. Despite these figures, less than half of Scotland’s family-owned businesses have a succession plan in place.

Glen Dott, an employee ownership adviser at Co-operative Development Scotland, discusses some of the issues family businesses need to consider when looking at their succession options, and why employee ownership can sometimes be the most effective solution.

Glen Dott

“Sometimes family business owners can bury their heads when it comes to the daunting task of planning for their exit. Yet, it is a vital decision which ultimately determines the company’s future. Rather than viewing it as a necessary evil, business owners should start to recognise succession planning as a potential opportunity for their company to evolve and grow.

“Employee ownership is one solution which offers these opportunities and can be an excellent fit for family businesses for a number of reasons. First of all, it enables the vendor to exit on their terms, giving them a fair price and allowing them substantial control over the process.

“Secondly, it roots the business in its community, keeping skills in the area and retaining jobs locally for workforces that are often long-serving and loyal. Thirdly, by handing control over to those who know it best, the values and ethos on which the company was founded, frequently at the heart of family-run businesses, can be preserved for generations to come.

“Finally, evidence demonstrates that employee-owned companies benefit from a more engaged workforce, which can boost productivity, encourage innovation, and ultimately drive growth and profitability. It can be encouraging and comforting for founders to feel that the businesses they have spent years of their lives building with their families will continue to go from strength-to-strength into the future, and that the employees will reap the rewards of this. 

The past couple of years have seen family-owned businesses including Auchrannie leisure resort in Arran, Harvey Maps in Doune, North Berwick-based Jerba Campervans and Beauly institution The Priory Hotel all move to employee ownership after recognising the suitability of the model as a succession solution and its potential for driving future business success. We expect take-up of the model will continue to accelerate in future years, as more and more businesses throughout Scotland’s business community become aware of the benefits.

The Priory Hotel staff

The Priory Hotel team

Succession planning should not be overlooked and family business owners looking for a smooth exit which secures the best possible future for their business should seek professional advice on their options at an early stage.”

To learn more about EO and whether it could be right for your business, check out our resources page, listen to our podcast or get in touch with us here using the ‘expert support’ option.

EMPLOYEE OWNERSHIP IN THE CARE SECTOR

There are around 110 employee-owned companies operating, with approximately 7,500 employee-owners generating a combined turnover of around £950 million. In recent years, the model has proved particularly popular with businesses operating in the care sector. Clare Alexander, head of Co-operative Development Scotland, shares their stories and explores why they are drawn to employee ownership.
11/12/15 - 15112301 - SCOTTISH ENTERPRISE    GLASGOW    Claire Alexander

Employee ownership has consistently shown to improve staff engagement and wellbeing, which in the care sector, leads to better patient experience and outcomes. As owners, employees also have a say in how the business is run, and clients and their families are reassured that the business will remain rooted in the area and be run for the benefit of local people.

These benefits are clearly demonstrated by Highland Home Carers, Stewartry Care, Paramount Care, Caledonia Social Care, and Aspire Housing and Personal Development Services.

Highland Home Carers (HHC) was founded in 1994 and became employee-owned in 2004.  Since then, the business has grown to become one of the largest independent providers of home care and support services in Scotland with over 500 staff.

The company aims to deliver the highest possible standards of care, enabling people in the Highlands to remain in their homes and in their local communities for as long as possible.  Moving into employee-ownership has ensured that HHC’s unique ethos was secure and provided a platform for growth.

Stewartry Care

Dumfries and Galloway-based Stewartry Care also became an employee owned company in 2004. Turnover increased by 16% in the first year and profitability by 39% and the company has continued to grow. Employees benefit from being informed on performance and having a say, with the opportunity to stand for election as a Director or Trustee of the company. The firm was awarded Care at Home Provider of the Year in the Scottish Care Awards 2018, with clients benefiting from a highly motivated care team.

Paramount Care, set up in 2000 by nurse Ruth Smyth who had a vision of a personalised care service that placed people at its heart, became employee-owned in 2017. It operates throughout Fife, Tayside, Perthshire and Clackmannanshire, delivering a range of services within people’s homes and within residential care homes for the public and private sectors.

Paramount was founded with the aim of providing a personal and approachable care service, where clients or employees wouldn’t have to call bases in locations like London or Birmingham whenever they had a query. Its aim was to provide a high quality of care with close and trusting relationships between carers and clients. Ruth felt that these qualities, which set Paramount apart from other care firms, could be compromised if it was bought over by one of them.

By selling it to an Employee Ownership Trust, Paramount Care continues to operate as an independent company rooted in the local area, run by people who care about it.

Caledonia Social Care, management and staff. L-R - Ross Wilson, Practice Team Leader; Carol Park, Administrator; Stuart Robertson, Regional Manager; Margaret Paterson, Managing Director; Derek Oliver, Regional Manager; Vicky Hoolihan, Corporate Services Administrator; Kenny Nicholson, HR Leader Taken 27-06-17

Caledonia Social Care

Caledonia Social Care (CSC) delivers care at home services throughout central Scotland and launched as an employee-owned enterprise on EO Day 2017 (30 June).

The launch of CSC represented a real boost to Scotland’s care sector, with an empowered workforce of 150 employee owners committed to providing an exceptional level of care to 480 clients. The firm benefits from high levels of colleague engagement, fair employment practices and lower staff turnover which helps lead to better outcomes for staff and service users.

The most recent care provider in Scotland to become employee-owned is Aspire Housing and Personal Development Services, which made the move in June 2019 with 186 social care employees becoming owners.

Staff at Aspire

Staff at Aspire

Aspire is passionate about empowering the individuals it supports to achieve a better life and a more self-directed and optimistic future, and employee ownership was an effective way to demonstrate this commitment to its employees as well. It enhances their opportunities to be more involved in contributing to the growth and development of the business, and allows them to equitably share the benefits from Aspire’s future successes.

In a sector where attracting and retaining the best people can have such a significant impact on performance, it’s easy to see why a business model which motivates, empowers and rewards them stands out. We look forward to more care providers recognising the benefits of the model and supporting them to become employee-owned in the future.

To learn more about EO and whether it could be right for your business, check out our resources page, listen to our podcast or get in touch with us here using the ‘expert support’ option.

ENGINEERING A SMOOTH TRANSFER TO EMPLOYEE OWNERSHIP

Precision engineering firm GS Brown, based in Fife, was established by 1974 by tool maker George Brown, who handed the reigns to his sons Des and Mike following his retirement. When the brothers were considering their own retirement, they wanted to ensure the company would continue to operate successfully and provide employment for its loyal staff, many of whom are local and long-serving. In May 2019, the firm became employee-owned, with 70% of its shares being held in an employee ownership trust.

We caught up with Des, who is Managing Director at GS brown, to hear more about their decision to sell the company to staff.

The GS Brown Precision Engineers Ltd team

The GS Brown Precision Engineers Ltd team

“As a family business with a well-established, close-knit team, it was really important for us to find a succession solution which was a good fit for us. Our priority was to enable GS Brown to continue operating without disruption, and to secure its future and the jobs of our staff. Around 70% of the firm’s workforce have had long service with it and the team includes families, with fathers and sons amongst the employees.

“If an external buyer had taken over the company, there would have been no guarantee of our manufacturing plant remaining here, where it was established, in the long-term.

“I first learned about employee ownership at a CEED (Centre for Engineering Education and Development) conference in the spring of 2018.  Realising that the model offered a great deal of potential and the opportunity to pass control of GS Brown over to those who know it best, I sought out further information.

“We were given initial support and guidance by Fife Enterprise, followed by in-depth insight from Co-operative Development Scotland and Ownership Associates, which enabled us to fully consider the merits of employee ownership and consult with our staff. The process was then initiated in November 2018. 

“We’re very pleased that the transition to employee ownership has all been relatively straightforward – the business has just carried on operating seamlessly.  GS Brown is now in a very strong position for the team to build on its success and reputation; we believe the company has a great future ahead and employee ownership is good news for everyone involved with it.

GS Brown’s transition to employee ownership was supported by Co-operative Development Scotland (CDS) and Ownership Associates. Legal services for the transfer were provided by Thorntons Solicitors whilst EQ Chartered Accountants provided financial services.

If you have a question or you want to talk about how employee ownership can help you, please get in touch with us here using the ‘expert support’ option.

FIVE COMMON EMPLOYEE OWNERSHIP MYTHS DISPELLED

Awareness of the many benefits of employee ownership continues to grow in Scotland, with uptake of the business model also increasing. However, there are a number of misconceptions around the model which can ultimately deter business owners considering employee ownership.

Here, Clare Alexander, Head of Co-operative Development Scotland, addresses five of the most common myths about employee ownership.

11/12/15 - 15112301 - SCOTTISH ENTERPRISE    GLASGOW    Claire Alexander

Claire Alexander

Myth 1: The process of becoming employee owned is a complex transaction

“While additional elements such as setting up a trust are required, an employee ownership transaction tends to be more collaborative than a standard business sale as everyone’s interests are aligned.  All parties want what is best for the business and its workforce, therefore less time and resources are spent resolving potential conflicts and the transaction is typically completed more efficiently.

“Furthermore, CDS offers a wealth of advice through its expert advisors, who can guide business owners through any perceived complexities throughout the employee ownership process.”

Myth 2: Employees cannot afford to make the investment

“Typically, when a business becomes employee owned, the majority of shares are bought on behalf of the employees by an Employee Ownership Trust. This is usually financed by contributions from the company itself, or a loan that is then paid back by the company. Employees don’t carry any personal liability for the debt assumed by the company in an employee buyout. Furthermore, when the trust pays out bonuses the first £3,600 is free from income tax, so is very tax efficient for employees.

“In some cases, employees also have the opportunity to invest their own money in company shares. However, this is a relatively small amount of the share capital, is usually voluntary, and will likely be undertaken using one of the HMRC recognised tax effective schemes.”

Myth 3: Employee ownership is only an option for retiring family business owners or entrepreneurs with no heir

“While this can be a common reason behind employee ownership, some owners may opt for the model despite having a suitable successor in order to reward the loyalty of staff and root the business in the local area. The seller may trigger an employee buyout a long time before they intend to withdraw from the company, remaining involved in the day to day running of the business for years before retiring.

“An increasing number of companies are choosing employee ownership as a means to attract, retain and reward staff”.

Myth 4: The vendor will have to sell their business at a lower price

“As they don’t have to negotiate with another business, the seller holds a great deal of control over the process. There is no reason that a carefully considered employee buy-out can’t deliver a fair price in line with the company’s market value. Indeed, when the tax advantages are considered, many sellers believe that they achieved a better deal when selling to an Employee Ownership Trust, than they would have achieved by pursuing a trade sale.

“With increasing number of businesses choosing employee ownership, specialist finance is now becoming available. Mainstream providers, like the banks, are also becoming more aware and supportive of the model.”

Myth 5: Employees will be more interested in keeping company profits for themselves than investing in the long-term health of the business

“Employees are well informed and understand the importance of investing in the businesses for the long-term. Decisions on bonus and share distributions are carefully considered in this context.

“Evidence shows that priority is given to investment in businesses’ long term success, for example in purchasing new equipment to improve efficiency while bonus and dividend payments being paid at a realistic level.”

To learn more about EO and whether it could be right for your business, check out our resources page, listen to our podcast or get in touch with us here using the ‘expert support’ option.

SHETLAND LIFE-SCIENCES CONSULTANCY BECOMES EMPLOYEE-OWNED

Shetland-based ESPL Regulatory Consulting (ESPL), is a unique business which provides specialist regulatory services to the life sciences and pharmaceutical / medical device industries. When a new medicine or a medical device is developed, the scientific data from laboratory studies and clinical trials needs to be reviewed, compiled and submitted to regulatory authorities around the world.  ESPL’s team of highly-experienced medical and regulatory professionals and scientists define strategies and complete these activities on behalf of its clients. One of the most experienced independent specialist consultancies in its field, it operates in throughout the UK, across the EU, and in North America and Australia.

In considering their long-term succession options, founders Helen, Tony, and Chris Erwood, were keen to identify a solution that would allow the business to continue to thrive and remain rooted in Scotland.  We caught up with Dr Helen Erwood to learn more about the company’s decision to sell to employees.

The ESPL Regulatory Consulting team at their Shetland location. Picture L-R: Holly Hunter, Diane Wood, Anna Watt, Helen Erwood, Tony Erwood.  Taken 29-03-2018.

The ESPL Regulatory Consulting team

It’s approaching time for control of the business to be handed over to the next generation.  We have built up a successful business from our Shetland base and we couldn’t have done that without the considerable talents and efforts of our team.  One of our core values is collaboration, and the employee ownership model reinforces that.

“It is enables control of the business to be passed onto the ESPL team who can protect the consultancy’s best interests and ensure the outstanding reputation it has earned within its specialist sectors will be maintained.

“We’re hugely thankful for the support we have received throughout the transfer, including the grant for legal costs provided by Highlands & Islands Enterprise, legal advice given by Blackadders LLP, and the assistance offered throughout the process by Ownership Associates.

“We are looking forward to the company’s continued growth under its new ownership model.”

If you have a question or you want to talk about how employee ownership can help you, please get in touch with us here using the ‘expert support’ option.

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