Not selling up(torchbox.com)
torchbox.com
Not selling up
https://torchbox.com/blog/not-selling-up/
14 comments
This is the first i've ever heard of the approach of selling down. Interesting concept.
Not the first time though. AFAIK John Lewis / Waitrose also underwent a similar process (and is not employee-owned).
https://en.wikipedia.org/wiki/John_Lewis_Partnership
https://en.wikipedia.org/wiki/John_Lewis_Partnership
Coincidentally it's not even the first time for the tiny, 3000-population town where Torchbox is based: an air quality consultancy based here did the same in December (https://www.dustscan.co.uk/about/news). (I live in the town but have no connection other than knowing a few of the Torchbox people!)
Link to their blog post https://torchbox.com/blog/not-selling-up/
Very cool idea, and the founders have a way to realize their equity as well.
> the founders have a way to realize their equity as well.
That's the part I don't get. Wouldn't they keep the profits anyway if they just didn't sell?
That's the part I don't get. Wouldn't they keep the profits anyway if they just didn't sell?
If they didn't sell, they would keep all future profits but not exchange the underlying equity for cash.
But they aren't exchanging it for cash, they are exchanging it for future profits ("They’ll pay us (...) from the company’s future profits") - which they would get anyway. No?
I may have been reading it wrong, but my understanding was that they would be exchanging their equity for a fixed dollar amount, to be paid from future profits. If they didn't sell, they would continue to receive a fixed percentage of profits. Essentially, they're converting their equity into a loan.
Torchbox, a digital agency with 65 employees and offices in Bristol and Oxfordshire, has become the first digital agency in the UK to transfer 100% of its business to its employees. The company offers digital product development and marketing services to clients across non-profit, healthcare and higher education sectors. It created Wagtail, the popular open source CMS now used by the NHS, NASA and Google. The founders first revealed plans to staff in March and expect the sale process to complete on the 28th June 2019.
Torchbox’s employees, who will receive a tax-free bonus of up to £3,600 every year as part of the deal, have elected a Trust of Directors from the existing workforce. The Trust will work alongside Torchbox’s Directors to oversee strategy and growth, with an emphasis on ensuring that the business’s sense of purpose and values remains paramount.
Torchbox founders Olly and Tom will be part of the Trust for five years, until their majority stake is repaid by the business. Staff will eventually be able to decide how to direct agency profits and will continue to input into the running of the business via the Trust, in a model similar to that of the John Lewis Partnership.
“When we were considering the future of Torchbox, we thought about the importance of retaining our independent spirit, continuing our fast growth and empowering our brilliant team to take an active part in our business,” explained Olly Willans. “We decided that by far the best people to own Torchbox are the people who have made it the success it is today, and the people who will continue to make it a success tomorrow. If we were going to choose employee ownership, then we wanted to commit to it entirely without maintaining any kind of minority shareholding.”