When Sarah Muston, founder of a 40-person design consultancy, started thinking about her retirement, she faced the same questions many business owners do: “How do I protect my legacy, take care of my people, and still get fair value for the company I’ve built?” Like many, she assumed selling to a competitor or private equity firm was her only option. But as she explored her choices, she came across the concept of an Employee Ownership Trust (EOT) – essentially selling your business to employees. The idea of handing the reins to the very people who had built the business alongside her felt right – but it also felt risky. Would her team really be ready? Would she walk away with less?
Fast forward two years, and Sarah’s company is thriving under employee ownership. She’s still involved part-time, the team is more engaged than ever, and the transition was far smoother than she imagined.
Sarah’s story is not unique. Since the introduction of EOTs in 2014, thousands of UK businesses have taken this route. And yet, misconceptions still hold many founders back. Let’s tackle six of the biggest myths head-on.
Myth 1: “I won’t get full value for my business.”
Sarah’s initial fear was that selling to employees would mean accepting a “discount.” In truth, when you factor in Capital Gains Tax relief (which is available on an EOT sale), the net outcome can be very similar to a trade sale.
Yes, third-party buyers might dangle bigger upfront figures, but they often come with caveats: job cuts, conditional payments, and hefty tax bills. By contrast, Sarah walked away with a comparable financial outcome – spread over time, but tax-efficient and with her legacy intact.
Myth 2: “I’ll lose control.”
Sarah admits she wasn’t ready to walk away cold turkey. Luckily, she didn’t have to. Post-sale, she stayed on as a director and even sat on the EOT’s trust board in the early years.
The new rules mean sellers can’t control the board, but that doesn’t mean disappearing overnight. In fact, most founders remain pivotal during the transition, ensuring continuity while empowering the next generation of leaders.
Myth 3: “My management team will miss out.”
One of Sarah’s concerns was whether her senior team would feel undervalued. What she learned is that EOTs don’t exclude tailored incentives. Her managers now benefit from additional share schemes alongside the employee-wide tax-free bonus structure.
The result? A fairer, more motivating reward system where everyone feels invested, but leadership still gets recognition for their bigger responsibilities.
Myth 4: “My employees aren’t ready for the responsibility.”
This was Sarah’s biggest worry. But once the sale was complete, she saw a remarkable shift: employees leaned in, engagement rose, decision-making improved, and the pride of being co-owners created a renewed energy.
The key was a strong succession plan and Sarah’s continued presence in a guiding role. Far from crumbling under pressure, her team flourished with the sense of ownership.
Myth 5: “It costs a lot to make it happen.”
Compared to the drawn-out, adversarial nature of third-party negotiations, Sarah’s transition was refreshingly straightforward. While there were advisory and valuation fees, the overall cost was lower, and the process far less stressful.
Importantly, deals like Sarah’s rarely collapse at the last minute, unlike many third-party sales that can drag on and ultimately fail.
Myth 6: “Recent tax and trustee changes undermine the benefits.”
The October 2024 rule changes initially worried Sarah. But as her advisers explained, the updates simply formalised what had long been best practice – ensuring EOTs are UK-based, fairly governed, and robust for the future. Far from diminishing the model, these changes made her confident that her business was on solid ground.
The Human Side of EOTs
For Sarah, selling to her employees wasn’t just a financial transaction. It was about protecting the culture she’d spent decades building, rewarding loyalty, and giving her people a voice in the company’s future.
“My biggest surprise,” she says, “was how empowering it felt. Instead of saying goodbye to my business, I found a way to let it grow beyond me.”
Her story is echoed by hundreds of business owners who have discovered that an EOT isn’t a compromise, it’s a future-focused, people-centred solution that benefits founders, employees, and the business itself.
So, if you’ve dismissed the idea because of the myths, it might be time to think again. Your employees may be more ready than you realise, and your legacy could be stronger for it.
If you’re considering an EOT, the first thing you need is expert advice. Email Partner Geoff Pinder to find out more.