When reviewing the transaction, O'Brien is quick to point out that the structure Print Management Partners and its team engineered had merit well beyond the initial financing.
First, with an ESOP in place, Print Management Partners now has an effective tool to attract, retain, give incentives to and reward employees, with several options for accomplishing any of these objectives. For instance, Brown says, "commencing in 1997, we are issuing ESOP stock to everyone in the company so everybody has a stake in what the company is doing." That's the incentive.
As for the reward, says O'Brien, "we have the option, for example, of passing profits to stockholders via 401(k) matching [contributions], without it being taxed. There are now several options we have to manage profits and pay a fair tax."
Second, O'Brien points out that the ESOP delivers built-in liquidity for company shares. "The reason most private businesses rarely last more than one generation is because there is nobody to buy out the founders or other stockholders when they are ready to retire or move on," he says. "But the ESOP means the exit strategy is already in place because when shareholders leave, they have the option of selling their holdings to the ESOP at a fair price."
Third, O'Brien says, Print Management Partners was able to fund its start-up operations without searching high and low for outside investors who would extract a high price in terms of ownership in the company. In the end, Print Management Partners didn't give up any equity--no small feat for a start-up company.
All of this esprit de corps seems to have paid off for Print Management Partners. After its first full year in business, the company reported profits on sales of nearly $4 million. And for 1997, O'Brien anticipates double that.
But in addition to Print Management's future success, O'Brien hopes the company's trail-blazing technique will help other would-be entrepreneurs cut loose from corporate America with nothing more than a pat on the back, some severance pay and a 401(k) investment. For these people, finding seed capital for a new venture is akin to being Dorothy in Oz. Their solution is always with them--they only need to click their heels twice.
David R. Evanson, a writer and consultant, is a principal of
Financial Communications Associates in