FAQs DOCUMENT

Covering Letter

 

A Message from Morts

So, chums, the cat is finally out of the bag! Eyeful is going to become an Employee Owned Business at the end of September! 

I’ve never been any good at keeping secrets, so I’m not only thrilled but also hugely relieved that Luke, Lloyd and myself can speak openly about this exciting new chapter in the Eyeful story.

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Making a decision like this is never simple or straightforward. It’s emotional. It’s time-consuming (oh, the paperwork! Arrrgh!). And it forces you to think seriously about the journey thus far, what we’ve built together and what the future holds. 

The first one is easy – the journey has been incredibly rewarding. Yes, it’s been challenging at times – sometimes really challenging - but I still can’t remember a day when I didn’t laugh or enjoy the warmth of friendship from one of you lovely lot. Those very early days are still crystal clear in my memory, from learning how to code our first website using an out-of-date Dummies book and a dial-up modem to surviving on two hours of sleep a night for a week to get the first Cabot Square Capital project delivered. In those early days, it was as much about proving the naysayers wrong as it was selling and delivering enough to keep food on the table. 

 

Fast forward seventeen-and-a-bit years, and we can definitely say we’ve done that. 

 

We now have a business that is not only financially very strong but one that also has developed incredibly valuable and trusted Intellectual Property, gained a remarkable reputation in the sector for innovation, quality and service and is home to the brightest, professional and loveliest bunch of people in the presentation world. Even when the universe conspired to throw things like a global pandemic at us, the strength of the business allowed us to hunker down, continue to provide support to our customers and ensure we all looked out for each other (albeit within socially distanced guidelines). If anything, we came out of lockdown stronger – that’s incredible testament to the quality of the business we’ve built together. 

 

The warm glow and incredible pride I feel when I talk about Eyeful comes from one thing – YOU. Eyeful people are bloody amazing. Each and every one of our employees plays a vital role in creating and maintaining the culture that makes Eyeful tick. Collectively, you have this strange gift that makes people feel special – from looking out for colleagues to caring and going the extra mile for our customers – and it’s worth way more than any clever IP or publishing deal. 

 

YOU are our competitive advantage. Never forget that.

 

Of course, when we talk about people, it’s more than those officially employed. Our business, culture and incredible reputation would be nothing without the likes of Sally, Rob, Steve, Dan, Nacho and countless other amazing members of the extended Eyeful family. It is impossible to put into words what their expertise, commitment, energy, passion and plain old friendship has meant to me personally and to the continued success of the business. Long may that remain.

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And so, what about the future? Well, words really can’t express how proud and lucky I feel to have been the one to kick start this whole thing, but it now feels like the right time to pass the baton on. In Luke and Lloyd, Eyeful has a leadership team with the vision, passion for presentations and proven expertise to guide the business to the next level. From the moment we started to explore the potential of EOT for Eyeful last year, they have both worked tirelessly to develop a robust business strategy that delivers steady progress while maintaining the things we all hold dear – company culture, personal growth opportunities and the chance to make a difference.

 

Under their leadership, there is a palpable sense that Eyeful is only just warming up and that the future holds incredible promise. 

Our trusted customer relationships, peerless product offering and proven intellectual property are all in place, but the ‘secret sauce’ that will power further growth and success is with our incredible people. Nothing works without the great Eyeful team, and so it is a natural step – a step Lisa and I are so delighted to be able to now take – to transition Eyeful to being an Employee Owned Business, run BY its employees FOR its employees.

 

The future is exciting, and, importantly, it’s in your hands. I can’t wait to see you all fly.

 

Morts

 

X

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EOT FAQs

The chances are that there are several questions pinging around your mind at the moment! 

We’ve pulled together a collection of likely ‘starter for 10’ questions along with some (hopefully) simple to understand answers. Obviously, it is imperative that you ask as many questions as you need (no question is a daft question!), so please keep them coming!

 

THE FUNDAMENTALS

So, what is an Employee Ownership Trust (EOT)?

Simon: An EOT is a trust created to hold shares in a company on behalf of its employees so that they become the owners (indirectly). 

The idea of Employee Ownership of businesses has been around for a long time - for example, the trust created by the John Lewis Partnership was first set up in 1929. 

The EOT scheme was created by the Finance Act 2014 to encourage more companies to become employee-owned.

 

How does the transaction work?

Lloyd: The easiest way is to think of it a bit like a mortgage.

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1. Simon & Lisa sell their shares to a newly formed trust – Eyeful Presentations Employee Ownership Trust (Eyeful EOT). 

2. The Trust obviously doesn’t have the money to pay the full value of the transation, so commits to pay off the debt over a period time (a bit like a mortgage). 

3. The Trust’s payments to Simon and Lisa are funded by the day-to-day running of Eyeful Presentations

4. Eyeful Presentations acts as a guarantor to the transaction (again, a bit like your house when you agree on a mortgage)

 

This process and the responsibilities of each party is documented in some very detailed contracts. These are in the process of being approved and will be signed at the end of September.

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When will we become an EOT?

Simon: The good news is that we’ve jumped through all the hoops from the likes of HMRC, and are approved to proceed to EOT status. To make life simple, we aim to complete the transaction as close to the end of September – our financial year-end – as possible.

 

What are the advantages of EOT?

Luke: The advantages are numerous, both to employees and sellers (Simon and Lisa):

• It allows employees to indirectly buy the company from Simon and Lisa without having to use their own funds

• The EOT is generally seen as a “friendlier purchaser”, with less stress or distraction on the day-to-day running of the business

• Simon and Lisa are selling to people they know and trust while also getting full market value for the business (this value is agreed based on an independent valuation and HMRC approval).

• There are tax benefits for both sellers and employees 

• Statistics show that most businesses flourish after moving to EOT status because employees are working for a business that they own. People typically become more innovative, entrepreneurial and motivated to contribute to its success.

 

Any disadvantages of an EOT?

Lloyd: There are very few disadvantages to moving to an EOT, and none of them impacts employees. 

 

They can be challenging to set up (there are a number of qualifying hoops to jump through with the likes of HMRC to ensure that the EOT is fair and viable). The good news is that we’ve flown through this process with the expert support and assistance of Simon Everingham and the team at Baxendale. They’ve made the complex a lot clearer!

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The other disadvantage is on Simon and Lisa – firstly, they may have got a higher price if they had sold the business to a trade buyer or to a Private Equity fund. For reasons explained later, this was not a palatable option for them.

 

Also, they don’t receive all the money for the sale of Eyeful upfront. We expect the timeframe for the transaction to be completed to be around 5 years, although we’re hoping to speed that up based on our plans and projections for the future. This obviously means that Simon and Lisa are taking on more personal risk, but they have every confidence that the Eyeful team will go from strength to strength.

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WHAT ARE THE REASONS FOR DOING IT?

Why choose Employee Ownership versus the other options?

Lloyd: Lots of reasons, but mainly due to Simon and Lisa wanting to see the business continue to flourish in its own right and directly benefit the employees as they drive the business forward. It’s a chance to reward Eyefulites for the part they have played in building a great business. The EOT approach makes every employee a custodian of the business for future generations, creating an environment where they can make decisions and investment over the longer term.

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Selling to a third party or getting external funding for a Management Buy Out might mean a quicker ‘pay day’ for Simon and Lisa, but it would also likely mean several changes that we couldn’t control. It was more important to Simon and Lisa that we found an option that would allow Eyeful to maintain its fantastic culture and talented people as well as ensuring we still work in the same way that we do with our extended family (Independent Sales Consultants and freelance designers).

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Why don’t more companies don’t do this? 

Luke: It’s not for everyone! Most founders and shareholders want to get their hands on their money as soon as possible, but for the reasons above, Simon and Lisa are happy to take payment over a number of years. 

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The EOT approach also allows us to have a controlled handing over of ‘the baton’, minimising the disruption for our people and customers. Again, many sellers want to move on quickly – Simon and Lisa are not disappearing overnight.

That said, EOTs are gaining in popularity, especially in the marketing agency world. It makes sense – marketing agencies are nothing without great people, and founders are exploring new ways of rewarding their teams while giving themselves a vehicle by which they can step away from the business.

 

Examples to check out are…

Emperor: https://emperor.works/ 

Torchbox: https://torchbox.com/ 

Tangerine PR: https://www.tangerinepr.com/ 

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There is growing evidence that Employee Owned businesses perform better than traditional businesses:

• Employees have greater involvement in the business, meaning that they are more motivated and innovative. 

• For similar reasons, it’s shown to also reduce absenteeism.

• Staff retention – and attracting new members of the team – also improves due to the greater personal investment people have in the success of the business.

• EOTs are more successful, profitable, and sustainable as employees become more entrepreneurial and want to contribute to the company’s success. 

 

@Simon - why are you stepping down? 

Simon: I’ve been incredibly fortunate to dedicate a considerable chunk of my working life to Eyeful. As I said in my introductory note, there’s not been a day that I’ve not felt incredibly privileged to have started and then played my part in building, slowly but surely, the business we are today. 

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Eyeful has given me the chance to, in a very small way, spot and nurture amazing talent (you know who you are) as well as go toe-to-toe with the major players in the presentation world. It’s allowed me to travel around the world, work with amazing people, push myself waaay beyond my comfort zone and even get a book published (albeit with the knowledge that most Amazon reviews reference the amazing illustrations rather than the insightful copy – ho hum). 

 

I hate the word ‘legacy’ - it smacks of ego, which I’ve never been a fan of - but I guess Eyeful is one of the things I am most proud of having a hand in. It remains an amazing adventure and, when the time comes, it will be tough to say goodbye. There may even be a few tears.

 

But I have other adventures to embark on. Our eldest, Beth, was one of the main reasons I started Eyeful in the first place – in another year, she’ll have completed her A-Levels and could be packing up to go to some far flung university. Peter, her brother, is only a year behind her. Time flies, and I want to be as present as I can in their lives before they start seeing home as merely a place to visit and drop off dirty washing (the truth is, one of them is already in the state of mind!).

Lisa and I have new adventures to enjoy together, too. Starting, growing and running a business together is a challenge – in the early days, it often felt like our third child; hungry and desperate for attention – and I’m excited about what future adventures we can uncover together. I’m not sure Lisa’s as excited, but I’m looking forward to it...

 

I’m aware I’m waffling, so I’ll leave it on this simple point: It’s time. It’s time for Luke and Lloyd, two of the most naturally talented people I’ve had the privilege of working with, to lead the business into the next episode. I know that in turn they are supported by amazingly skilled and passionate people who can and will change the world of presentations for the better. 

 

Chums - it’s now your time to shine. I couldn’t be handing over my ‘third child’ to a better or more talented bunch of people.

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What does Simon & Lisa’s reduced involvement look like? 

Lloyd: As of 1st October, Simon and Lisa will be part time employees, working 2 days per week. 

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Simon will focus his time on developing the profile and efficacy of Eyeful’s Intellectual Property. This is likely to include providing coaching support to our storytelling team as well as publishing new content via our website, publications and, with any luck, a new book. 

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Simon will also provide assistance to Luke and Lloyd as they transition to board director responsibilities. He will also serve on the Trustee Board until the final payment is made.

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In the short term, Lisa will maintain responsibility for payroll, supplier payments and as an escalation point for HR. Her other duties will be shared out across the leadership team. It is anticipated that these roles will be fully handed over within 18 months.

 

WHAT DOES THIS MEAN TO THE WAY WE WORK?

Who has control over things like hiring and firing? Does everything go through the Trustee Board?

Luke: One of the reasons that the EOT approach appealed to Simon and Lisa was that, in the main, nothing much changes! As board directors of the business, Lloyd and I will continue to manage the day-to-day running of the business, including making decisions around people, remuneration, budgets and other benefits.

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The role of the Trustee Board is NOT to manage the company. Their responsibility is to ensure Eyeful is being well led and in a way which maximises employee engagement and commitment. 

 

What level of decision is the EOT Trust needed for?

Lloyd: The trustees of the EOT are there to hold the Management Board to account and represent the interests of the employees. As such, they won’t get involved in the day-to-day running of the business. However, they will have the right to approve/block decisions that would impact all employees. For example:

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• Buying another company

• Taking out a substantial loan

• Moving office location

 

The EOT Trust is made up of five people:

• 2 x Employee Trustees – voted for by all employees and responsible for the beneficiaries of the trust i.e. employees.

• 1 x Board Trustee – either Luke or Lloyd (TBC) as a representative from the main company board. This allows all trustees to have a voice, and an ear, directly into the boardroom.

• 1 x Founder Trustee – Simon, until the transaction has been completed

• 1 x Independent Trustee – unconfirmed, but likely to be Jeff Lermer, the company’s accountant for the last 10 years or so. Not only does Jeff know and love Eyeful, he has extensive board experience and sits on other EOT trusts.

 

What’s involved in being an Employee Trustee on the EOT Board? 

This is about representing your colleagues and ensuring that employees have a voice when it comes to the big decisions and holding the Management Board to account. 

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This is an important role, but worry not – Baxendale are running training sessions for all Trust board members.

 

We anticipate meeting every six months, but this will be confirmed as part of the contract process. 

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How do I put myself forward?

We will be running elections for the two Employee Trustee positions over the next month or so. More details to follow.

 

Will we struggle in the next 5 years while we pay the debt? 

Lloyd: Details of the total sales price for the business are confidential, however the valuation and repayment schedule have been approved by HMRC. Their decision to approve is based on two considerations:

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1. The valuation needs to be deemed a fair market price, based on historical performance and profitability. 

2. The repayment terms are deemed not onerous on the business, based on historical and current performance and profitability.

 

In the same vein, Simon and Lisa would not want to put Eyeful under duress during the repayment process. A considerable amount of money will be retained in the business as ‘float’ and money has already been set aside for large costs like corporation tax and quarterly VAT bills. The value of the repayments is a fraction of the profits the business has consistently made for the last few years. 

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If we have a great year, can we complete the transaction quicker? 

Luke: Absolutely – this is something called a ‘profit sweep’ and allows large portions of the debt to be paid down quicker. Think of it in terms of overpaying your mortgage – you can do it when the money is available. This is very much the intention and will get the EOT to ‘financial freedom day’ quicker.

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However, it is important to note that Simon and Lisa have instructed the lawyers to adjust the repayment terms to ensure that employees also benefit from any overperformance. This is not the norm! This means that if we have another spectacular year, a portion of the overperformance will go to speed up the repayment, with the remainder being shared as an employee bonus, subject to the tax-free allowance already mentioned. This illustrates the employee-centric approach being taken by Simon and Lisa throughout this entire process.

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What does this mean to the extended Eyeful family (ARKS, Sales Engine, Dan, Nacho)?

Simon: This was another important consideration when looking at the options…and one of the reasons we’ve opted for EOT.

Our extended family is incredibly important to us. Dan and I go way back – he was our entire design team for some time! The same goes for Sally, Rob and Steve – they are way more than extended members of the Eyeful team; they have been incredibly close and valued friends for decades. So whatever decision Lisa and I made about our involvement in the business, we knew we had to find a way to ensure that these valued relationships were unaffected.

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The brutal truth is that we couldn’t guarantee this if we had gone down the trade sale (i.e. selling to a larger agency) route. The same would likely be the case if we have third party investment through Private Equity – they’d enforce changes in pursuit of an extra few £s of profit, which in turn would have put pressure on these valued and trusted relationships. 

 

The thought of that sent a shiver down my spine – it was not something Lisa or I would ever counsel. 

 

The beauty of the EOT is that nothing changes. It’s business as usual for employees and, importantly, the extended Eyeful family.

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WHAT DOES THIS MEAN TO ME?

So, am I a shareholder now?! Does that mean I need to buy shares? How many do I get?

Luke: Simon and Lisa will sell 100% of their Eyeful shares to the Trust as part of the transaction. The Trust acts on behalf of all employees, without there being a need to allocate specific shares to individuals. This means that everyone benefits when the company succeeds, rather than just a handful of individuals. 

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Oh, and another benefit is that any bonus payments are tax free up to a certain level (see below).

 

Tax free bonus? Sounds good! How does it work?

Luke: Bonuses paid to EOT employees benefit from an income tax (but not national insurance) exemption of up to £3600 per employee per tax year. This means you don’t pay a single penny of tax on Trust bonuses up to £3600 each year. 

 

How are ‘All Employee’ bonuses calculated and shared out?

Lloyd: These will be on the same terms across all eligible employees, i.e. the Trust cannot skew benefits to the advantage of particular employees. However, it can allocate benefits of differing amounts by reference to factors such as salary, length of service or hours worked.