Businesses across every industry face challenges that threaten long-term stability — economic downturns, workforce shortages, succession issues, and competitive pressure. But one segment of companies consistently proves more resilient:

Employee-owned companies.

According to research from the National Center for Employee Ownership (NCEO), employee-owned companies are 50% less likely to fail than comparable non-ESOP companies.

This is not a small advantage — it’s a structural difference in how these companies operate, engage employees, and build long-term strength.

The Numbers Behind the Advantage

📌 1. ESOP companies survive longer

• ESOP companies are half as likely to go out of business compared to similar traditional companies.

• During the COVID-19 pandemic, ESOP companies were 3–4 times more likely to retain staff, helping them reopen and recover faster.

📌 2. ESOPs experience stronger financial performance

• Employee-owned companies grow approximately 2.3% faster after establishing an ESOP.

• ESOP firms often report higher productivity, higher profitability, and stronger cash flow, contributing directly to their reduced failure rate.

📌 3. Turnover drops dramatically

• Employee-owners are 40–50% less likely to look for a new job compared to employees in non-ESOP firms.

• ESOP companies frequently see voluntary quit rates around one-third of  industry averages, which stabilizes operations and reduces costly workforce disruptions.

📌 4. ESOP employees build significantly more wealth

• The average ESOP participant account balance often falls in the six-figure range, providing meaningful retirement wealth.

• Employees with ownership stakes are more motivated to protect and grow the company’s  long-term value.

Why ESOP Companies Fail Less Often

1. Employees act like owners
With a direct financial stake in the business, people make better decisions, collaborate more effectively, and focus on long-term success — not short-term shortcuts.

2. Retention boosts stability
Lower turnover means companies maintain skills, culture, and continuity. This is especially valuable in industries like construction, manufacturing, and professional services.

3. ESOPs strengthen culture and accountability
Ownership naturally improves communication, transparency, and engagement — all of which reduce operational risk.

4. Stronger financial structure
Many ESOP companies operate with discipline, long-term planning, and strategic reinvestment, leading to healthier balance sheets and stronger resilience in downturns.

The Bottom Line

Employee-owned companies aren’t just surviving — they’re outperforming. Being 50% less likely to fail isn’t a marketing slogan — it’s a measurable outcome backed by decades of research.

If you’re interested in learning more about how an ESOP might work for your company, reach out to info@ecpesop.com.

Cyndi Hines, CPA, CVA