Noblitt said that not only was TeamShares’ offer “very generous,” but the company also wanted to maintain Yankee Mattress’ independence and ultimately return the business to its employees. .
“I’ve never heard of anything like that,” Noblitt said. “I couldn’t understand how or even why they were interested in my company. They didn’t even know anything about mattresses.”
Noblitt had never heard of Teamshares’ business. I had a model Never before Were present.
“This is very unusual,” said Angela Lee, a finance professor at Columbia Business School in New York.
The New York-based company says it wants to transform capitalism by distributing more wealth to more people outside of Wall Street and Silicon Valley. Currently, the richest 10 percent of U.S. households control nearly 70 percent of total wealth, while the bottom half own only 2.4 percent.
“Current capitalism is not working,” said Michael Brown. Co-founder and CEO of Teamshares. “It’s not very comprehensive.”
But Teamshares’ motivations aren’t entirely altruistic. The company, which has raised $245 million from investors, sees plenty of opportunities to make money. how?Partly due to sales Business products such as credit cards and insurance For small to medium sized businesses.
There are also longer games. For his 20 years, Teamshares has granted dividends and stocks to employees, which the company hopes will motivate employees to increase sales and profits. At the end of the 20-year period, TeamShares says it will sell the remaining 20 percent stake to its employees, at a price that will likely be worth much more than what TeamShares originally paid, and that the company will You can make a lot of money on the backend.
But experts say there are big risks to the 20-year promise. Anything can happen in 20 years, including changes in economic conditions that could affect the health of small businesses and Teamshares itself. The company’s model is also very complex. A lot of things need to go right for Teamshares to reach its goals.
“It’s a lot of work to make this happen,” Brown admits.
Nevertheless, Teamshares believes there is untapped opportunity. Small businesses account for 43.5% of the total $23 trillion US economy. But investors tend to ignore these more modest businesses, such as car dealerships, manufacturers and cleaning services, in favor of the big companies and glamorous tech companies that often dominate the public eye.
Startup is seeking large investors To expand our business. Leading venture capital firms such as QED, Khosla Ventures, and Union Square Ventures back Teamshares, which has acquired 84 companies since its founding in 2019, including seven in Massachusetts. Among them are Yankee Mattress, Mass Retail Cleaning in Florence, and Blood Service Center in Chicopee. Teamshares’ goal is to acquire 1,000 small businesses by 2030.
Professor Lee said he is “bullish” on TeamShare because “the company is solving real problems.”
Small businesses (generally defined as businesses with 500 or fewer employees) make up 99.9 percent of U.S. businesses.But only 20-30% of them reach the market According to the Exit Planning Institute, it is actually for sale.
“Why is it so difficult to sell a small business?” said Brown. “We were intellectually fascinated by it.”
Furthermore, the institute predicts that 4.5 million such companies, totaling more than $10 trillion, will face executive retirement over the next 10 years. That would mean a huge amount of wealth being thrown away.
too Why private equity firms are increasingly focused on acquisitions Erin Towery, an accounting professor at the University of Georgia’s Terry College of Business, said small businesses do.
“There’s going to be a lot of essentially untapped investment opportunities,” she says. “Small businesses are the heart of the U.S. economy, and they need capital.”
Private equity firms typically buy distressed or underperforming companies or bundle companies whose owners are ready to sell. They will install a new manager who will take him 3 to 5 years to run the business. Ideally resell them for a profit.
But Teamshares is not your typical private equity firm. The company is looking for relatively healthy small businesses with annual profits ranging from his $400,000 to $2 million or more, with owner compensation. In 2 of the last 3 years. And it has a very different long-term plan.
When Teamshares acquires a business, it immediately begins granting stock to employees, along with dividend payments. The better your business performs, the more shares and dividends Teamshares will pay you.
whole concept It is based on the idea that employees who own part of the company will engage better with their managers. Customers can innovate faster because they can benefit directly from the value they create.
“When you give people a stake in the outcome, they’re more motivated,” said Brown, CEO of TeamShares.
according to numerous studiescompanies in which employees own at least 30 percent of the stock are more productive, grow faster,and less likely to go out of business than your opponent.
And Teamshares does more than just transfer shares. The company offers classes to its employees that are essentially a Business 101 bootcamp. Employees know how to read financial statements and understand the company’s strategy and performance.
“We’re giving them the tools to understand their role in the business and how to grow it,” said Adam Miller, a new Teamshares employee. He is the president of Yankee Mattress and previously worked for Yankee Candles for nearly 10 years (the two companies are unrelated). “I didn’t know two things about mattresses.”
But TeamShares wanted to send a message to employees that Yankee Mattress was entering a new era of exploring new ideas and ways to grow.
“I never intended to be just the next Joe. [Noblit]” said founder and former owner Miller.
The program has already shown results in improved performance.
At Mass Commercial Cleaners in Florence, for example, employees had previously shied away from large-scale projects, said Caterina, another executive at TeamShares who hired and trained people to run the business. President Kai said.
But now they Even if they own part of the business, many employees find that larger projects can generate more profit. As a result, Tsai said, the number of such projects the mass-market cleaning company nabbed jumped 180% quarter-on-quarter, he said, resulting in hefty bonuses for employees.
Still, Teamshares is acquiring companies on a 20-year timeline. Will a model of slowly selling the business to employees over 20 years stand the test of time?
“Twenty years is a long time,” Lee said. what happens, For example, what if an outside buyer wants to acquire a small business for a large sum of money?
The company says that will never happen.
“Team Share will not sell the company for investment returns,” the company said in response to follow-up questions. “We commit to companies 80 percent ownership of their employees within 20 years. By owning the company forever, rather than selling it, better financial outcomes for everyone involved, including team shares. will be brought.”
Part of that is because Teamshares makes money in other ways. After acquiring small and medium-sized businesses, the company exclusively sells financial products such as banking services, credit cards, and business insurance. Therefore, by holding a small business for his 20 years, Teamshares will have a stable revenue stream for at least 20 years.
Not everyone is so sure about the model. “I don’t think it’s a wise business decision,” Lee said, to categorically rule out a potential deal that could create significant wealth for everyone (team shares and employees) in the short term. Ta.
But that’s the crux of Teamshares’ mission. The company says: This is to encourage long-term ownership of small businesses rather than employees cashing in for payday.
And the idea of Yankee Mattress continuing to exist into the future certainly appeals to founder Joe Noblitt.
“I thought Yankee mattresses would sell well and disappear,” he said. “But it feels great to know that I can leave something behind. I’m their biggest cheerleader.”
Thomas Lee can be reached at thomas.lee@globe.com.
