Grand Rapids ranks highly among cities nationwide for its number of employee-owned companies.
Certified Employee-Owned LLC, a five-year-old San Francisco-based company that certifies businesses with employee stock ownership plans (ESOP), ranks Grand Rapids 12th in an inaugural list of the top 25 markets in the U.S. for ESOPs.
Certified Employee-Owned, which also consults with companies making a transition, lists 21 employee-owned companies with a Grand Rapids address. Several more are located throughout Kent County as well as in neighboring Muskegon, Ottawa and other counties around Grand Rapids.
Grand Rapids is one of nine markets in the top 25 U.S. cities for both the total number of certified employee-owned companies and for ESOPs per capita, according to Certified Employee-Owned. Engineering, construction materials, and manufacturing are the top sectors among the ESOPs in Grand Rapids.
Zeeland — with six ESOPs, or one per 920 residents — ranks as having the highest density in the U.S. for employee-owned companies. Among them are design and engineering firm Disher Corp., Extol Inc., Innotech Corp., Inontime Inc., and Ventura Manufacturing Inc.
The number of ESOPs nationwide has been growing steadily as more business owners who want to exit view employee ownership as a viable option, especially among family-owned companies. ESOPs are an alternative to selling to an outside buyer or private equity investor, said Rachel Hain, membership manager at Certified Employee-Owned.
“We’re definitely seeing that in play. They want to leave it in good hands and selling to employees is a way to do that,” Hain said. “When an owner sells to employees, it keeps everything rooted in the community, keeps the money in the community and everything stays local.”
The Certified Employee-Owned directory lists about 5,600 companies nationally that operate as an ESOP in some form, and 168 in Michigan.
Lauren Davis, the regional president for Huntington Bank in West Michigan, has noticed a growing interest among business owners to transition to an ESOP. Huntington Bank is presently working with three or four companies moving to an ESOP, which compares to just one a year ago.
“They want to carry that legacy with those longtime employees who have been with owners over the years. While they may not be family members, they want to give back to them” with a stake in the company, she said.
Grand Rapids’ high ranking for ESOPs could result from a “parochial, family, caring for your neighbor and community” culture in West Michigan, Davis said.
“You don’t want someone from outside the market taking over the company. You want the family and the neighbors who have been here all along running that company,” Davis said.