What is an EO?
Employee Ownership (EO), is sometimes referred to as the John Lewis model. EO is a government incentive to encourage more businesses to be run by the employees
In a nutshell, for NOVOS:
- Sam and Antonio have sold 90% of their shares to an ‘employee trust’.
- This trust is a legal representation of the employees set up as a separate entity on companies house.
- The role of the trust is to represent what the employees want and need, giving them a voice and say in how the company is run.
- We’re also launching a People Committee which is responsible for collecting feedback, ideas, and issues across every part of the business and feeding that into the Trust.
- Sam and Antonio still run the day to day business with the leadership and management team, however, any larger decisions that will directly impact profits need to be voted for or against by the trust for final sign off (e.g. new market, service expansion, and very senior hires).
It’s important to note this is not an EMI scheme. It’s very different and is treated as a business sale to another company. In this instance the new company is the employee ownership trust (EOT) referenced above.
How does this differ from a normal ‘sale’?
We strongly believe that this is a better route than a traditional merger or acquisition for an agency
We can list out incredible agencies that no longer exist due to the purchasing company absorbing the brand once the founders have left. We are yet to hear a positive story about an agency that has been purchased by another.
This is a very common trend and compromises the longevity of small and medium-sized agencies.
The worst stories we’ve heard are from our current staff that have been through sales at previous agencies they’ve worked at. Everything that they’ve joined gets ripped up and ultimately impacts their personal lives.
The table below is how we see the benefits of an EO vs a traditional agency acquisition route (this is a visual we shared with the team):
The only beneficiaries of a ‘traditional’ route are the founders. They typically get a lump sum of the valuation, then they are put on an earn-out with targets they’ll never achieve.
They leave, their reputation with the staff they hired is destroyed, and eventually, the business they built gets ripped up. Either it becomes a shell of the company they built with a poor reputation or it’s just absorbed by the holding company.
Why have we opted for EO?
Below are the 3 core reasons of why we decided to go down the EO route vs a traditional sale to a larger company:
Values
Our company has always been ‘people-first’, so many agencies use this but don’t actually live and breathe it internally. We have gone a step further and are now a “people-led” agency, led by the staff that helped build the company to where it is today.
Everyone gets rewarded
Through a traditional sale, the team that has helped to build the company don’t get any benefits from the sale. The founders, and a select few with shares, benefit from any dividends/rewards from a sale, while the staff are left with the transition to a much larger company often with a completely different culture.
Longevity
The longevity of the business is maintained as with so many incredible independent agencies of the past that are now non-existent after they’ve been absorbed into their parent company. This way, NOVOS can live on for longer as both Sam and Antonio continue to support its growth.
What does this mean for clients?
Our staff have always given their all for our clients that match our values.
Becoming EO just means this love and care is taken to a new level. The staff directly benefit from client retention and growing the account inline with client performance. Our team benefits directly from our success, so they really care about keeping clients happy!
In general, many agencies have a serious issue with retention, even more so in digital agencies. We’re predicting that the EO change will help NOVOS to retain senior talent even stronger than we do now, again having a positive impact on clients.
Additional benefits we predict for our clients are:
More togetherness amongst our team, which will make them even more motivated to be the absolute best and ahead of every competitor.
We’re not selling to an external party or being acquired, so no going through major changes that we see every agency do, and you’ll never have to experience that with us
Morale and enthusiasm will be up further for everyone in our team because they have more skin in the game, so therefore will go even more above and beyond for the business as they’re owners now as opposed to treating it as a standard job.
What does this mean for staff?
We've always been generous with staff benefits. Unlimited holiday is one of our biggest perks - we can only offer it by placing a high level of trust in each other to support our teams.
Over the years, we've explored many perks but have now settled on a peer-to-peer rewards system. Each month, staff receive credits and allowances to praise and reward teammates. These credits can be claimed as vouchers for leading eCommerce brands, discounts on medical appointments, experience days like driving an F1 car - or the ever-popular Deliveroo orders.
Beyond financial gains, staff will have a much larger voice in company direction and decision-making. Through the People Committee, ideas and issues will be fed to the Trust and shape how the agency runs.
Our long term vision is to have over 50% of the profits shared between the team. When achieved it will be a concept completely unique to the agency world.
What about the founders?
An Employee Ownership model is structured to incentivise founders and shareholders over a longer period, ensuring the long-term health of the business.
For the first three years, we chased sales targets like other agencies. But once we became the first SEO EOT business, our mindset shifted—focusing on being best in class, working with the right clients and staff, and building sustainable profit over a 10+ year window.
We created NOVOS to be truly different from other agencies in the industry. Becoming an EO company enhanced this vision. The next phase is to share over 50% of profits with staff—something we can only achieve by working with brands that share our values.
We're both confident that the people who helped build this agency are the right people to lead it to the next level of growth.
