Chris Michael: Okay. Hello to New Jersey and New York. My name is Chris Michael from EOT Advisors. So happy to present to everyone here the world-exclusive premiere video interview with Preston Martin, founder of Bicycle Technologies International, which is, I think, possibly the country's largest employee ownership trust, by our estimation. He's beaming in from Santa Fe, New Mexico.
Preston Martin: Hi. How is it going Chris?
Michael: Good. Good to see you. Good to see you. Okay, so the way the format of the presentation today is going to go, it's about half an hour long all together. Then we'll cut over to live Q&A via Zoom and the link above. I'm going to give as quick as possible an overview on what an employee ownership trust actually is. And then we'll cut back to our interview with Preston. Okay, here we go.
So, again, everyone, my name is Chris Michael from EOT advisors. It's always an honor to present at state employee ownership center conferences and the National Center for Employee Ownership conference. I have to say that I have a special affinity for the New Jersey/New York Center for Employee Ownership for a number of reasons. But one of them, one of the top reasons, is that I'm from New Jersey and New York. I was born in New York City, and raised in New Jersey in Bergen County, in Teaneck, New Jersey in particular, although I do live in New York City now. So, I'm the Founder and Managing Director of EOT Advisors. We've helped to really develop, really put the employee ownership trust on the map in the United States. In the contemporary period, we're the only EOT shop and dedicated EOT shop in the country. Some of the kind of foundational research supporting the use of EOT in the United States was some pieces republished in Tax Notes and Probate & Property back in ‘15 and ’17. As you'll see there, I’m also a professor at Rutgers. So, that's another connection that I have with New Jersey and the Center.
So, very excited about getting as quickly as possible to the interview with Preston Martin. This is intended to be a brief overview of the employee ownership trust. You can't really begin to speak about the EOT without first talking about John Lewis Partnership, which is sort of like the Macy's of the UK, a really large fancy department store, except that it's not just a Macy's, they also have a supermarket chain attached to it. So, John Lewis partnership is both John Lewis department store and also Waitrose Supermarkets. So, that's why you see the Waitrose and John Lewis on the sign on the cards there. These are some pictures from their annual end-of-year meeting where they announce the annual profit share as a percentage of compensation. So, everybody at those events is getting an 11% or 17% year-end bonus as a part of their EOT profit share. It's the largest and oldest EOT in the world. It has currently about 83,000 employee-owners. Each employee is an employee-owner from day one, although that's not a requirement to do it that way. But at that company, they choose to make employees into owners on day one. They did US$14 billion in 2020 revenue. They've been employee-owned for almost 100 years. They transitioned to a partial EOT in about 1929. And they went to full 100% EOT ownership in 1950.
And I should also add that EOTs have always been the mainstream form of employee ownership in the United Kingdom. The US went down the ESOP path, but the UK has been and continues to be a place where EOTs are the main structure, the main approach towards employee ownership.
So, what is an EOT? An EOT is a trust that holds some or all of the shares of a company on behalf of most or all of the employees of the company. It’s just like an ESOP, in the sense that all of the things that make something employee-owned are there. There are three main components to employee ownership––and these components are agreed upon nationally and internationally for 150 years. If you're talking about employee ownership, employee ownership means these three things: it means you're sharing the financial rewards of the company, be that profits or gains; that the corporate governance at the highest level of the company has a mandate to act in the best interests of the employee-owners; and then finally, it's a great place to work, it's a really wonderful culture at the workplace. So, the ESOP has all these things and the EOT also has all of these qualities.
The difference though, is that an EOT does not have the share accounts, the per-employee, broken-out, individual employee share accounts that the ESOP has. And so, all the differences really, between the ESOP and an EOT, if you can keep in mind this fundamental difference, I think you can kind of almost figure out the rest of the differences. So, because an EOT does not have individual employee share accounts where you're looking to buy an employee's shares back when they retire, it's not a retirement plan. The ESOP is regulated retirement plan. The EOT is not. The ESOP, because it's a regulated retirement plan has some tax differences that allow it to act as a tax shield. You have to pay taxes at the end of the day, but those taxes are deferred. With an EOT, you don't have any special tax shield difference. At the same time, an EOT is not regulated under ERISA. EOTs are regulated under state trust law.
EOTs, because you're not looking to repurchase shares in any given year, there's no need for an annual evaluation. Again, you're not going to be repurchasing employee shares. So, there's no future schedule of repurchase obligations. In good years, you reward employee-owners with profits, in bad years, if there's no extra profit sharing that can be done in any given year, then there's no profit sharing done in that year. You can decide year by year how much to share with the employee-owners. Likewise, it's not a regulated retirement plan, ERISA plan, there's no need for a third-party administrator with an EOT. One way to think about it, if it's helpful, is that, EOTs are employee ownership but without the ESOP piece. Another way to think about it, which I'll come back to later on in the session, is that EOTs are a private, flexible, low-cost and easy-to-understand alternative to the ESOP. I'll add a fifth element here, which is that they're a sustainable alternative to the ESOP.
Two key points to remember, similar to earlier, once the shares go in, they stay in. So, once the shares go in to the EOT, they tend to stay in there. And another way to think about it from the employee side is that employees, and this is the British expression, employees are “naked in, naked out.” So, they're not buying shares to come into the employee ownership, and they're also not getting bought out of shares, when they leave the ownership trust. It functions really quite like any law partnership, or any professional partnership. You are made a partner because of the value that you bring to the firm. There may or may not be a kind of a nominal buy-in. But that's sort of beside the point. Your benefit is getting a share of the profits while you work with the law partnership, with a professional partnership. And when you leave, you're not expecting to get a fortune. When you leave the company, rather, you're bought out, if at all, at that nominal level that you bought in. The benefits are while you work at the company.
So, if the EOTs are so great, how come we haven't heard of them before? How come they haven't been used in the United States for the past 50, 100 years, etc.? If I see the letters EOT, I just think of some strange new Greek fraternity. Okay, very fair question. Here's my answer. This is a timeline of the use of the EOT in American history. Now, turns out, in another part of my life, I'm an academic and do historical research. And it turns out that the EOT was used in the distant US past. So, we have a case of an EOT company in 1897, in the state of Washington. In the 1920s, the most famous employee-owned business in the United States was an EOT. In fact, the founder was a Harvard grad, he was advised by a University of Chicago economics professor who later went on to be US senator from Illinois, Paul Douglas. They did tours all over the country. There are write-ups about them in newspapers all over the country. I don't have any evidence of this, but I imagine that it might have served as some inspiration actually, for the John Lewis company in the UK, or for John Lewis himself, in adopting this approach in the UK.
Things were looking good for the EOT model, certainly in the UK, but in the US as well. So, what changed? And I think the answer to that question, why did the ESOP become the predominant model in the US? And I think the answer to that question is easy enough. The answer boils down to the man in the bowtie on the bottom of the screen. His name is Louis Kelso. He invented something called the Kelso plan, first with Peninsula newspapers in 1956. He was leveraging tax code that already existed since, I think about the early 20s, for employee retirement benefits. And he was like a nuclear power plant in a human body. He went all over the country, flew all over the country, proselytizing what was called the “Kelso plan.” Ultimately, his second wife, Patricia, joined him in the crusade, they published books, very high-profile figures, convinced companies all over the country just with their own steam, the two of them. For one reason or another, the Kelso plan wound up getting formalized as a part of tax code when ERISA passed in ’73, ‘74. And from that point forward, you had a whole generation of practitioners who were now able to leverage something that wasn't just driven by the kind of charisma of Louis Kelso, but was now in federal law and legitimized by federal law.
And so, to begin with people like John Menke, who was actually a senior tax associate for Louis Kelso, opening up the first ESOP shop in 1974, to Corey Rosen opening up the NCEO in 1978, which is, of course focused on employee ownership, but naturally, would tend to, has and continues to focus on ESOPs, because it was the main thing, the main way to do employee ownership in the US. So, from that point forward, from the mid ‘70s forward, the rest is history. For decades now, the ESOP because of federal law, and because of a whole generation of wonderful service providers, who were able to make a living by helping businesses become employee-owned, that's been the main story of employee ownership in the United States.
Now, I'm a big fan of employee ownership and I'm a big fan of the ESOP. At the same time, I believe that you can like something, right, you can be a fan and advocate of something, but you can also critique it, you can be aware of its limitations. And I think that, for my part, I was just kind of at the right place at the right time, coming into this field a decade ago, in 2009 and early 2010, aware of how wonderful the ESOP was, as a device, to create employee ownership, that nothing like it ever existed. I wrote a 300+ page PhD dissertation arguing that point, but at the same time, I was aware of the limitations of the ESOP, as most of the people in the field are aware that the ESOP isn't the right fit for every company. And I started to invent, what I thought was out of whole cloth, the employee ownership trust approach. I wasn't aware that it existed in US history or in the UK yet, and I published an article in Tax Notes. A little bit later, after that, I discovered that actually this exists, it's the mainstream form in the UK and sort of did a second article crystallizing my thinking on the employee ownership trust in 2017, in an American Bar Association publication Probate & Property, a trust attorney publication, and started doing EOTs, launched EOT Advisors in 2017.
So, our published research shows that the employee ownership trust is not subject to ERISA, that existing US trust law works. We don't need any new laws to do an employee ownership trust. And in fact, you can do an employee ownership trust in any state in the country. You would keep your corporate domicile where it is at the moment. And if trust law in your state is not perfectly ideal or perfectly suitable for the creation of an EOT, you would simply use another state’s trust law to create the trust. I mean, this is extremely common, for example, with family trusts. You live in New York, you live in New Jersey, but you might want to use trust law from Delaware or New Hampshire or something like that.
My only minor contribution, if there is any, is to note that there's been a development in trust law in the last 20 or 30 years, something that didn't really exist in the Anglo-American tradition, in the 1,000 years or so that we've had trust law. Since 2004, in the United States, you can now create a trust for a purpose. Trusts do not any longer have to have human beneficiaries. You might recall the Leona Helmsley case with the trust for her dog. There's more to talk about there. But for the moment, we can say that you can now have something called a non-charitable purpose trust, where you identify a purpose as the overriding goal of the trust, and human beneficiaries, if there are any, can be made secondary to that purpose. And so, for example, adopting this concept to the context of employee ownership, you can decide now whether or not you want to have employees as legal beneficiaries with standing to sue. You can create your own customized enforcement mechanism that doesn't rely on the employee-owners themselves being the beneficiaries entitled to sue the company, or to sue the trust, I should say, and you can thereby minimize litigation risk.
So, we launched in 2017. EOT Advisors is the first financial advisory and investment banking firm in the country focused on assisting business owner selling to an EOT. We work in all 50 states. We provide a one stop shop for EOTs. So, we structure the transaction, we design the employee ownership, we help provide legal forms, and we also do valuation, pointing the right direction on ownership culture, and get you to a close. To date, we've worked on close to about 15 US EOTs. We've worked with every US EOT in the contemporary period. We're on track to get that number up to 20 by the end of this year. And I think the future is very bright at this moment for EOTs. Here are some representative clients. You see BTI is in the upper left there. We've done some video interviews with Optimax, with Paras and Associates, with more interviews on the way.
So, what are the deal characteristics for an EOT? These are not requirements or limitations. I've done EOT transactions where the enterprise was down to between just a little north of a million dollars. And I've done EOT transactions that were significantly above the range on the screen there [i.e., 50 million dollars]. But the kinds of companies that I'm finding are coming to me to ask about EOTs, or who have become my clients, tend to have enterprise values in the range of $10 to $20 million, and a typical workforce size in the range of 50 to 100 employees. And again, these aren't requirements. Some clients have been down to just a dozen employees. Other clients have been up to hundreds of employees and I’m working with a company now that's in the thousands. But the typical company coming to speak with me tends to be in that 50 to 100 employee range.
Typical time to close is about six months. Again, there's flexibility here. I've closed an EOT transaction in under two months, and I’ve taken up to a year and a half in another case where we were just really taking our time with the transaction and making sure every single detail was exactly to specification. But six months feels like a nice, I don't know if it's a leisurely pace, but very comfortable pace to complete an EOT transaction.
So, what are the advantages of an EOT for the seller? EOTs are a private, flexible, low-cost and easy-to-understand alternative to the ESOP and I'd add a sustainable alternative to the ESOP. EOTs are private. So, when you do an ESOP transaction, you're going to be sharing your, first of all, it's a quasi-public transaction with Department of Labour oversight, you're hiring a trustee, you're giving that trustee money to hire an attorney to hire a valuation firm and then you're now bargaining with the trustee that you just hired and with their attorney and with their valuation person. You have to involve probably about six or seven firms all to help you get through the ESOP transaction. Each firm probably has a number of representatives from each firm. So, it's not uncommon when you're doing an ESOP transaction to have 20 people on a call fleshing out how the ESOP is going to proceed. EOTs couldn't be more different. With an EOT, I'm getting you there, A to Z, soup to nuts, I'm the only person that you have to hire. In my experience, when I set out to do EOTs, I wasn't thinking privacy is the main concern, but more and more with business owner clients of mine, I'm noticing, and it makes sense what a value people put on privacy. For most of my clients for the last 20 years, the only people that have seen their books has been them and their CPA. That's it. So, I think privacy, it's an important value. And it's, again, I think the ESOP is a great tool, it's just that the ESOP doesn't speak as closely to that value of privacy as the EOT does.
EOTS are also flexible. Most business owners that I've encountered are pretty independent spirits. They like to do things their way. A lot of business owners become the boss, because they don't want anybody to tell them how to do things. Right. So, again, as great a tool as the ESOP is, it's a retirement plan, there's no getting around that. There are a set of sort of options that you have when it comes time to structuring an ESOP. And there's some variation, certainly, there's certainly a good amount of customization that can be done with an ESOP. But with an EOT, it's just really wide open, it’s an extremely flexible tool. I mean, you have companies that adopt an EOT and want equity compensation, equity sharing to be a big part of the EOT. So, notwithstanding everything that I just said earlier in the presentation about EOTs and the shares going in and staying in an EOT, you can always layer on equity compensation programs, broad-based equity sharing, broad-based share ownership, you can always add that on to the EOT, on top of it. So, if you want to do broad-based stock options, if you want to have a phantom stock plan, if you want to do actual shares outside of the EOT, you're not limited in that. You're not limited to a purely profit sharing approach to employee ownership. It's lots of flexibility. And you can see that in the different clients that we've worked with in the past. And you can also see that in the UK as well.
Low-cost EOTs are, it's still somewhat in flux, the pricing around EOTs, but it's at the moment looking like EOTs are coming in at about 20% of the cost of an ESOP to implement, and about 20% of the cost of an ESOP to maintain on an annual basis. EOTs are also easy to understand. It's easy to understand for you as the seller. You don't have to spend a year and a half learning what ESOPs are in order to create employee ownership at your company. Again, six months on a fairly sort of even basis, meeting every couple of weeks, will get us to any EOT. It's also easier for the employee-owners to understand. Everybody understands a profit sharing program. And you don't have to train employees on what it means to have share accounts and what it means to value the company's shares. Again, there's flexibility here, but by default an EOT would involve a profit sharing program and annual bonuses.
So, as great as all of these advantages are for the EOT, I think that there are a few additional points to mention in the current climate. One is that, fewer sellers to an ESOP are using a 1042 tax deferral option. So, from the seller’s perspective, that's the real benefit to doing an ESOP. It's that you get to defer taxes, invest the sale proceeds in the stock market, and get the appreciation on what would have gone to the tax collector. And when you sell the stock, you still have to pay taxes, but you get to defer capital gains for a period. Fewer sellers are using that option for a number of reasons. Some sellers prefer to invest in, for example, real estate than operating companies, other sellers might be interested in international securities. There are a host of reasons they might also not be interested in the complexity, the added complexity, a host of reasons why sellers aren't using 1042s on ESOP transactions. But the fact of the matter is that only about a third of sellers even use the 1042 on ESOP transactions.
Another important thing to note is that private equity firms are more and more targeting lower middle market businesses. So, all the business owners that I speak with, they say they're getting a call every day from a private equity firm or an investment bank with bids or offers to buy them out. That's relevant for us in the employee ownership community because it now means that privately held ESOP companies in a lower middle market that simply not have been on the radar for private equity firms, for conglomerates, are now on the radar. And because of ERISA rules, because of the requirements or mandate, I should say, that ERISA trustee consider offers for purchase of the business. And there's even a requirement that if the offer is good enough that they might have to sell the ESOP out, even if the employee-owners don't want that sale to occur.
There's a real concern that if your goal is to, not necessarily create employee ownership forever, but at the very least, to have some kind of sustainable employee ownership program that might last at least a few decades, let's say. It’s not necessarily an imminent threat. It really depends on your company, your industry, what's happening in the market around you. But it's a real concern, at the very least, that ESOP companies are being bought out. And so, if your goal is to create sustainable employee ownership, then again, an EOT is something that you might want to think about.
Another factor here is that, unfortunately, there's been more ESOP litigation in recent years. That's a burden that I think not many people want to have to contend with. Again your, I think, litigation risk is minimized with the EOT and as a result of the increased litigation, ESOP costs have gone up, and again, points to perhaps doing an EOT.
So, that's it on my presentation. Here is my case study slide for Bicycle Technologies International. You can see the warehouse there, you can see the inside, you can see some bikers, and they're based in Santa Fe, New Mexico. And don't have to do anything more here because we're going to turn it back to our interview with Preston.
First of all, I'd like to thank you so much, again, for being here for this world-exclusive interview with you as founder of largest EOT in the United States, Bicycle Technologies International. And I'd like to start off the interview by asking just kind of your origin story. What was the founding origin story of BTI? I know, of course, you had a partner originally. Tell us some of that.
Martin: Right. BTI started in Ashland, Oregon, fresh out of college, bike racing and thought, “Wow, suspension, bicycle suspension is taking off right now, we're going to do bicycle suspension service.” So, me and my partner fixed up my garage with its dirt floor and basically renovated the whole shack into a space where we could do our repairs, and also warehouse parts. And that was the beginning of our distribution company BTI, Bicycle Technologies International. So, that was 1993, in Ashland, Oregon, and then we moved to Santa Fe, New Mexico in 1996. And then…
Michael: What brought about that move? Is that like a personal lifestyle decision for you and your partner to move down there, or it was a business decision or?
Martin: It was a combination. We were looking for a more centralized location for the company to operate somewhere with a longer riding season, and not to mention the great weather and great food and southwest.
Michael: Awesome, awesome. And then tell us about the company's growth over the years since the founding, and since the move. I mean, how have sales been? How's your distribution network grown over the years?
Martin: Well, it's been perpetual growth since we started. The move to the Southwest was really helpful for the company to become established with shops all across the US and not just the West Coast. We ended up adding a second warehouse in Sparks, Nevada in 2017. And that gave us one-day shipping in the whole west coast. So, our business only blossomed, especially in the West, and we'll continue to look at opportunities for expansion with more warehouses.
Michael: Fantastic. And we're heading into talking in a few minutes about your employee ownership trust. It occurs to me to ask what was the transition like, I guess, both to Santa Fe, but then also and then in terms of opening up the new warehouse in Sparks in terms of employees? Did you have employees come with you? Did you have to do new hires down in Santa Fe or what was that process like? Or was this still a kind of a growth stage where it wasn't so much of an issue?
Martin: We were fairly small when we moved to Santa Fe. So, it was primarily my partner and I who moved down and then hired staff here in Santa Fe. And then when we opened up the warehouse in Sparks, it was a whole fresh staff who started that. Some coming from competing distributors, bringing their you know knowledge and background to help us get established there.
Michael: Fantastic. So, let's shift into talking a bit about employee ownership. How far back in this journey did you begin to think about something that might––you might not have even known the term employee ownership––but you just you might have known you wanted to do something kind of good with your business when it was time to exit, or maybe even that you'd want to do something that was good for your employees when it was time to exit? How far back was that? Or how did that enter the thought process?
Martin: Well, I really think the journey for the EOTs started with thinking about a succession plan. And that came about in early 2020. And honestly, it's one of those things that every business owner with a mature businesses is told, “You should be thinking about your succession plan.” And, well, it's one of those things that you just keep pushing off and say, “I'll get to that tomorrow.” And ultimately, with how rapidly the world changed in 2020, everything kind of became clear that I needed to change my priority. So, I read a survey of our employees in mid-2020 and it revealed their strong desire for a more defined career path and greater earning potential. And it was with those remarks that I really said, “Okay, this requires special handling. How, how do I combine a succession plan with these goals, the employees’ goals?” And so, that's where employee ownership became a priority, rather than just polishing up the books and selling to the highest bidder and, and that made more sense to look at the options out there in the employee ownership world: ESOPs, worker coops. We looked at those, they didn't really check all the boxes for us. And doing a leveraged buyout with the employees presented its own debt challenges. So, here, I was poking around on the internet, and came across some articles by Chris Michael. And you helped me understand the simplicity and the value of the employee ownership trust. So, that's, in a nutshell, that's how we ended up looking at the EOT.
Michael: Got it. And if you don't mind stating a few more words about some of the other options for employee ownership. I mean, it is clear that you wanted to exit the business, at the same time you saw this desire on the part of the employees to have opportunities for growth within the company, and for more earnings, growing their salaries inside of the company. You said you looked at other options. And of course, these are all great options. I'm a big fan of them. Everybody who knows me knows I'm a big fan of all kinds of employee ownership. I just see the EOT as one tool in the tool belt. What made you sort of think that maybe the ESOP or the coop wasn't the right fit for you, versus the EOT being the right fit for your company?
Martin: Well, the ESOP was probably the best known, and I was fairly certain that that would be the direction we might go. And at the end of the day, I did the interviews, several ESOP attorneys who could help provide those services and came to understand the cost structure, and the number of people involved, and the annual requirements to maintain an ESOP, and it just became clear that the formula wasn't right for our company. Alternatively, worker coops, another interesting model, it really, to me, spoke to decentralized decision making that kind of wasn't exactly what we wanted. We wanted a strong management culture that still encouraged individual achievement amongst the employee-owners. And so, that's why we ended up going towards the EOT, which, really, does keep that emphasis on the current management structure and keeping that largely unchanged, but bringing in more of a voice for the employee-owners and members of the trust.
Michael: That's perfect. One of the things that you said before on a prior occasion is just to kind of the difference between the ESOP approach to employee ownership, which is that the ESOP is a retirement plan versus, the default, I keep saying the default mode of structuring financial rewards in an EOT, because EOTs are so flexible. You can do it different ways, but the default mode of structuring financial rewards sharing in an EOT is profit shares. So, if you could speak a little bit about your thoughts about that?
Martin: Well, the ESOP, like you said, is a retirement program. So, the company would give the employee a share in the company, and then when they leave the company, they're able to cash out. And it depends on how well the company performed as to whether they actually gained or lost when they were with the company. Our big challenge there was, we didn't want to basically incentivize an employee to leave. An ESOP is giving the employee a reward only at the point that they depart the company. And so, when things get rough in a year where things aren't going great, when your cash might not be that great, it's not a good time for employees to leave, but that's exactly what might happen under an ESOP.
Michael: It's an interesting point that you raise, and I don't hear that discussed very often in the employee ownership community. I mean, it's clear, on the one hand, that ESOP companies tend to have a lower turnover than the typical company, but it is curious to think about what the potential effects might be of having that incentive of the buyout for individual employees, and what effect that might have on turnover, and whether or not it might look different in an EOT context. We'd have to look at data from the UK. And over time, as we have more EOT companies in the US, we'd have data that we can use here as well. So, now, I know that a part of your idea of bringing in the EOT and transitioning to EOT ownership was precisely your aspirations for BTI to continue to really grow quite strongly in the future. And so, let's get to that in a moment or two. But before we get to that, those kinds of sort of future plans for BTI, just if you could share a few thoughts or experiences over the last year. You guys transitioned end-of-year, between 2020 and 2021. You spent about a year, you've had the EOT in place. How has it been since the transition?
Martin: Right. It’s November now, we started in January of this year. And we made an announcement, first day of the year, welcoming everybody back from New Year's break, and surprised the heck out of everybody. That was not something that I had prepared anybody for. But well received, the employees were full of questions naturally, “How does this work? What are the benefits? Explain its perpetual trust model.” The legacy and culture of BTI is intended to be maintained in perpetuity, provided that's the will of the employee-owners, the members of the trust. In return, the members are partaking in the profits each year. There's a formula that we use to split up the profit between reinvesting in the company and in profit sharing.
Michael: And so, the employees have received it well. How has business been? Any particular experiences with the employee-owners, the members since the launch, so to speak?
Martin: Right. I think what I'm seeing is a lot more engagement with the employee members, that they're asking the right questions about our expenses, about how to increase sales, improve margin, they generally care about the bottom line in a way that they did before, but now they're very tuned in, so to speak.
Michael: Good, good, good. I know, of course, the company is going to be paying off the note for a number of years, because it was seller-financed, you financed the transaction yourselves, are you going to be doing a little profit share for this year to kind of get things going? And what do you expect that to look like or plans for that?
Martin: Correct. So, for 2021, we're on a fiscal year that runs through December 31st. And therefore, we’ll wait until our financials are completed, and then we issue profit sharing checks. And the employees, of course, they might have been used to seeing something in the December timeframe from the company in the past. And so, this first year, this transition year, we're going to keep some of the bonus in December, and then the remainder will come out in the spring.
Michael: Awesome, awesome. And so, then getting back to the sort of the issue of sort of BTI’s future and your kind of plans in the design phase of putting together the EOT, how do you think about the future growth of the company, even beyond your involvement with the company, and the EOT, how those things work together?
Martin: Right. Well, like I said earlier on, we're more interested in encouraging individual achievement over just top-down control. And so, I’m really excited about the new engagement I spoke of, but really, it's the management here that is keen to make sure that the values behind the employee ownership trust are understood, not just by the members, but by the whole company, that this is a different type of culture they're working in now. And that DIY spirit, do it yourself, is now kind of percolating through the pores of the company. BTI’s innovations over time have occurred internally, that we are one of those companies who doesn't always hire out just to accomplish every task. We like to do it ourselves. So, we have a broad IT department that solves problems on the go. Our marketing department, it takes some videos, and photography, we’re very…
Michael: It’s pretty cool! Actually, you got a lot of content out there!
Martin: That's right. And so, the EOT dovetails really nicely with BTI’s number one core value, which is, take care of each other. We're really concerned not just about the co-workers, but also our customers, our vendors, and the community at large. We're trying to make sure that this company is going to be around for the long term, creating jobs and wealth for our community, and as well as, obviously, the members of the trust.
Michael: That's a good point, I think, to--. We'll have to record more of these discussions for the future. We're limited in our time for the New York Conference. But that might be a good point to end on, which is that, although, of course, employee ownership is at the core of all of this, I feel like every time I call you, you're on the way to some big bike giveaway for kids or something like that. So, if you could talk a little bit about how some of that kind of community giveback element kind of can stay with BTI?
Martin: Well, it's interesting that you mentioned that because as part of developing the EOT, we also developed a non-profit called Bicycle Harvest. And part of the annual profit-sharing formula includes, not just reinvestment and the share for the employees but also part going to our non-profit. Part of the profits are reinvested in this non-profit to help build our community, not just in Santa Fe, but around the state and many other areas where BTI has a presence. So, one of our programs Free Bikes for Kids, in its first year, collected and repaired, over 1,000 bicycles, donated all over the state. We also do Thanksgiving and that national program that collects food on bicycles, donates it to the local food banks. And that's been around for over 20 years now.
Michael: Awesome, Preston, that's just amazing stuff. Thank you so much for agreeing to participate in this interview and this event, the New Jersey/New York Standard Employee Ownership Conference. Thank you so much. And we're gonna move to live Q&A right now and invite everybody to click on the link on the top of the page there. Okay, see you guys in the Zoom meeting.
