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In a significant shift within the entrepreneurial landscape, Softstar Shoes in Oregon has become a beacon of employee ownership. Since January, the 30-strong workforce of the artisan shoemaker has taken the reins of the business, following the decision of former owner Tricia Salcido to sell the company to her staff. As Salcido, now 56, prepares for retirement, her leadership has given way to a new culture of collaboration and innovation among employees, who are eager to share their ideas for improving the business.
A Growing Trend in Employee Ownership
Salcido’s experience reflects a broader movement in the United States, where an increasing number of entrepreneurs are choosing to pass their businesses to employees instead of seeking external buyers. According to a 2025 study, around 600 American firms transition to employee ownership each year. This trend comes on the back of a substantial rise in investment funds designated for such sales, ballooning from $500 million in 2024 to $865 million last year—a clear indication that employee ownership is gaining traction.
The benefits of this model are substantial. Research shows that businesses owned by employees tend to be more productive, have lower rates of redundancy, and often pay higher wages. For Salcido, this transition was also a means of safeguarding local jobs and preserving the unique craft of shoemaking in the US, which she feared might be lost to larger, cost-cutting corporations. “It’s something you put your life’s work into… most small business owners really care,” she remarked, highlighting her commitment to her team and community.
The Silver Tsunami: A Wave of Business Transfers
As many small business owners near retirement age, the impending “silver tsunami” poses a significant challenge. A report from McKinsey indicates that approximately six million American small and medium-sized enterprises will have owners retiring between now and 2035. This unprecedented wave of ownership transitions is prompting a crucial question: what happens to these businesses when their founders step down?
Ethan Rouen, an associate professor at Harvard Business School, notes that he frequently encounters owners contemplating the sale of their businesses. Many of these individuals find that their children are uninterested in continuing the family legacy, leading them to consider alternatives that align with their values, such as employee ownership. Rouen emphasises that this structure not only preserves the business but also maintains a sense of community and responsibility among employees.
Pathways to Employee Ownership
Various mechanisms exist in the US for employees to acquire ownership of their companies. At Softstar Shoes, the transition was facilitated through an Employee Ownership Trust (EOT). This structure allows a trust to take ownership on behalf of the employees, enabling a gradual payment to the former owner through future profits rather than requiring an upfront buyout. While this approach carries inherent risks—Salcido must wait to receive her full payment—it fosters a sense of shared purpose among the staff, who now have a direct stake in the company’s success.
In contrast, William Stockwell of Stockwell Elastomerics opted for an Employee Stock Ownership Plan (ESOP), which involves placing the business in a trust, allowing employees to earn shares that can be cashed in upon leaving the company. This method has become the most prevalent form of employee ownership in the US, with over 6,600 ESOPs currently in operation, employing nearly 11 million people and holding assets exceeding $2 trillion (£1.5 trillion).
Another alternative for businesses looking to transition to employee ownership is the formation of worker cooperatives, where employees buy shares in the company. These models resonate particularly well with younger workers disillusioned by traditional corporate hierarchies, as they promote a more equitable distribution of wealth and decision-making power.
The Challenges of Transitioning to Employee Ownership
Despite the growing interest in employee ownership, there are notable hurdles to overcome. Establishing EOTs and ESOPs can be more complex than executing a traditional sale, often deterring business owners from pursuing these options. Additionally, the longer timeline for receiving payment and the increased risk involved can add to the reluctance.
Moreover, a significant barrier remains the lack of awareness surrounding these ownership models. As Salcido pointed out, “No one’s heard of them,” indicating a need for greater education and resources regarding employee ownership.
In central Pennsylvania, Paul Silvis is currently navigating the process of transitioning his manufacturing business, SilkoTek Corporation, to his employees. At 71, he feels confident in his decision. “I’m getting ready to ride off into the sunset at some point,” he stated, reflecting the sentiments of many retiring business owners.
The Road Ahead for Employee Ownership
Experts suggest that retiring entrepreneurs keen on passing their businesses to employees should begin planning well in advance. “It’s not something you want to begin the year you want to retire,” cautioned Stockwell, highlighting the potential complexities involved in the transition.
However, there is a glimmer of hope on the horizon. Recent political momentum in Washington is aimed at streamlining the process of employee ownership, with the Department of Labour launching the Employee Ownership Initiative to promote this practice and provide guidance. With bipartisan support in Congress, there’s optimism that more business owners will consider transitioning to employee ownership in the coming years.
Why it Matters
The shift towards employee ownership presents a promising solution to the challenges faced by retiring business owners, while simultaneously fostering stronger, more engaged workplaces. As more entrepreneurs consider this path, the potential for a more equitable distribution of wealth and a stronger commitment to local communities grows. In the face of a looming ownership crisis, employee ownership could not only preserve legacies but also usher in a new era of collaborative business practices, benefitting both employees and the broader economy.
