HOW DO YOU SAY GOODBYE?

A business owner plans her exit

Cheryl Stritzel McCarthy

“My goal was to leave this company in the best position possible for its continued success. Every single employee is equally important to this company. They all are what make it incredible.”

Patty Seaman, president and owner of Team Technology

Goodbyes are hard. Business owners know that as well as anyone. Patty Seaman, president and owner of the computer consulting firm Team Technology, took five years to decide on her succession plan.

She is selling her Bellingham-based company to its employees, at 5% per year to each of the five employees. She launched the plan Jan. 1, so the transfer will be complete four years from now.

Team Technology serves as computer consultants to small- and medium-sized businesses and augments in-house information technology at larger businesses. Clients range from businesses with three workstations to corporations with 200-plus workstations in multiple states and are located from Seattle to the Aleutian Islands, with remote workers across the country. Team Technology earns more than $1 million in revenue annually. Recurring revenue for its services has more than doubled over the last three years.

“My goal was to leave this company in the best position possible for its continued success,” Seaman said. “Every single employee is equally important to this company. They all are what make it incredible.”

How did she go about it? “My recommendation is to find someone who knows the ins and outs of the process,” Seaman said. “I was lucky to have been given the advice to meet with Kirsten Barron (of Barron Quinn Blackwood, in Bellingham). She was the key to this process.”

Seaman highlighted the pluses of the plan. “All employees are being treated with the same sense of value. I think this is critical. They are being entrusted — and are trusting each other — with the future of the company. The work they put into the company to make it sustainable is in every way an investment into their futures, not only for job security in the way anyone who has worked for a small business has experienced, but for the actual value of the company related to their stake in it.

“I don’t feel like there really are any cons yet,” Seaman said. “I just need to let go.”

In this industry, most companies like Team Technology are sold to the highest bidder, and indeed Seaman received multiple offers.

“The market seems to be rapidly consolidating, which only helps to differentiate us in the long run,” Seaman said. “Maybe I am naïve. It isn’t about the money for me. I spent 18 years trying to make Team Technology the best possible place to work. Life is short. There isn’t anything more important than family and it would hurt to see that environment changed.”

What makes the transfer to employees the best solution?

“The employees. In our field,” Seaman said, “you can find brilliant peo- ple. But when you find these people and they are a joy to work with, you have a winning recipe.”

History

Seaman was working for another computer consulting firm in Bellingham in 2005 when the opportunity came up to buy its customer base. “I was an empty nester (my youngest had just started at Western) and was asking ‘what next?’” Seaman took it over three weeks later. Counting herself, it had three employees.

Over the years, employee numbers fluctuated depending on client needs. For the past five years, Team Technology has had the same six employees, including Seaman.

“Over the years, we grew to as many as 15 employees,” she said. “But the overhead grew also. I found the sweet spot was around 6 to 8 employees. … In 2017, our turnover dramatically stopped as our culture shifted from being metrics-based to results-based; in fact, since 2018, we’ve had no turnover whatsoever. When you find a group of professionals who are willing to be honest about their strengths and limitations, prioritize the best interests of clients, and share the burden of work as a real team does, that is the right sauce.”

Seaman herself took a circuitous route to Team Technology. She was studying natural resources management at California Polytechnic State University in the early 1970s and worked as a firefighter in 1975. “I was one of the first female wildland fire fighters that season. That was quite a difficult role to fill. Not for the work, but for the acceptance of a woman in that position. That made me question my future.

“I moved to Lake Tahoe and skied for two years, then moved to Lopez Island for four years. In 1981 I moved to

Bellingham to go back to school. The task was to find a career where I could make a living in Bellingham. I ended up going to Skagit Valley College and getting a degree in computer systems technology. I was in the first graduating class for that new degree. I was hired on at Paccar Technical Center (a Mount Vernon-based company that designs and manufactures trucks such as Kenworth and Peterbilt) before I graduated.”

Advice

What advice would Seaman give to other companies considering various succession plans, including one like this? “Think long and hard about what you want. How will the employees feel? And your customers?”

With a step this momentous, you can see why five years is not too long to research, contemplate and finalize the decision.

ESOP, employee-owned — what’s the difference?

Cheryl Stritzel McCarthy

An ESOP (employee stock ownership plan) gives ownership to employees by allocating shares from an ESOP trust. It’s a federally regulated benefit plan. The trust owns the corporation and exists to benefit current and future employees. Employees don’t “buy in,” but rather they accrue shares while working and receive the value of those shares upon separation or retirement. Employee owners may or may not be voting members. Companies that choose ESOPs usually have at least 20 employees.

It’s worth remembering that significant variations exist within ESOPs and other employee ownership plans, which can be as different as the companies that use them.

At an employee-owned company, sometimes called an employee cooperative, employees become direct owners of the company via gradual buy-in (loans can come into play). Usually, each employee has one vote. Employees become — or in a larger company, elect — the board of directors.

Both routes have tax advantages.