WILLISTON, Vt. (WCAX) – The bankruptcy of a Vermont garden center business is raising questions about the employee-owned business model.
Burlington-based Gardener’s Supply Company recently filed for Chapter 11 bankruptcy, in part, because of retirement payouts to employees.
Gardener’s Supply was an early adopter of so-called employee stock ownership plans, a business model giving employees a direct financial stake in the company.
Vermont has dozens of these businesses, like Switchback Brewing, King Arthur Baking, Chroma Technology and PC Construction, just to name a few.
According to court paperwork, a number of factors led to Gardener’s downfall, including a boom and bust business cycle from the pandemic and a number of longtime employees looking to cash out. It raises the question of how other employee-owned businesses are doing in the face of an aging demographic.
“You have the risk of the downside and the reward of the upside,” said Matthew Cropp, the executive director of the Vermont Employee Ownership Center.
Cropp specializes in helping companies transition to being owned by employees.
He says there’s a confluence of factors contributing to any employee-owned business’s bottom line, including what product they offer and how it’s doing in the economy.
But he says the most important thing is how they structure their business and balance retirement payouts and retirement plan contributions from new employees.
“You have this cycling of ownership happening over time rather than happening in one big burst every 20 years,” Cropp said.
Vermont Information Processing, a beverage software company, recently sold after facing a similar scenario– explosive pandemic-era growth but with an aging workforce.
Rather than face crippling retirement payouts, the sale of the company saw employees receive massive payouts.
State commerce officials say a big piece of it is planning, which can be different in a volatile business environment with trade wars, pandemics and more.
“There’s a lot of great things and a lot of joy in running a business, but there are a lot of things you just don’t expect that you have to prepare for and you can’t always prepare for everything,” Vt. Commerce Secretary Lindsay Kurrle said.
Cropp adds on the flip side that employee ownership can be a solution to our demographic challenges.
More than half of Vermont businesses are owned by baby boomers. Cropp says passing a company off to their employees can make a valuable succession plan.
“Ensuring this generational transition isn’t a harmful thing for our economy but ultimately sets us up for success and prosperity,” he said.
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