There are people who spend their days going through the motions of their career. And then there’s Dylan Wiman.
As Wiman climbed the ladder in his fields of construction and private equity, the Grand Junction native was reading, studying, learning.
A man he admired, the person unknowingly helping forge his beliefs, was a private equity investor for a firm in New York City named Peter Stavros.
Over his career, Stavros had helped lead a number of successful investments through the one of the nation’s biggest private equity firms, KKR, and pioneered an employee engagement and ownership model that empowers employees by making them equal owners in a business, gives them a voice by eliciting their engagement in company decisions and trains them in financial literacy.
“His work is super inspiring and because of him, I’ve been wanting to do some sort of employee ownership in the deals I’ve been working on over the years,” Wiman said.
Sparks fly as Rocky Mountain Steel employees Marshall Meyers, left, and John Schohn, right, trim large steel beams inside the warehouse. (Hugh Carey, The Colorado Sun)
After 10 years in construction, Wiman went into private equity. He “invested in some deals, did some merger and acquisition advising,” and became the kind of person who could buy a company. So in 2022, when the owners of Rocky Mountain Steel Inc. started hinting that they were ready to retire, Wiman said he was interested in buying.
He’d always wanted to follow in Stavros’ steps and create an employee-owned company, so that’s what he encouraged Rocky Mountain Steel owners Tim Warner and Bernie Lorimor to go for. They and their employees did, with the help of the Colorado Employee Ownership Office at the Office of Economic Development and International Trade.
The deal came at the perfect time, because OEDIT has been working since 2020 to make Colorado an easier place for business owners to explore and convert to employee ownership models.
OEDIT says across the United States, an estimated 6 in 10 business owners plan to retire or sell their businesses within the next decade, yet only 15% of businesses are passed on to the next generation and only 20% of listed businesses sell.
Employee ownership, on the other hand, gives business owners a guaranteed succession plan and retains important jobs in local communities.
And in Colorado, where 48% of the state’s small businesses are owned by people 55 or older, it could mean the difference between a lot of businesses shutting down in the near future or a lot of them staying open and thriving, through a model Wiman says counters “wealth becoming pooled into a small minority of people” and that could “correct a distribution of wealth that I think is a little out of whack.”
When Warner and Lorimor were ready to sell, OEDIT supported them in creating an Employee Stock Ownership Plan.
Now, Rocky Mountain Steel continues to fabricate commercial steel products for schools, arenas, recreation centers and other structures, but it is owned and operated by 30 employees.
How employee ownership benefits business
Three main types of broad-based employee ownership have been around for decades, says Project Equity, a leader in the movement to expand employee ownership: employee stock ownership plans, worker cooperatives and employee ownership trusts.
- Employee stock ownership plans: An ESOP is like a 401(k) qualified retirement plan, but used to transfer all or part of a company’s shares to a trust administered on behalf of the employees. Project Equity says they are highly regulated, free to employees, and long-term wealth building among other things.
- Worker cooperatives: Worker cooperatives are similar but have lower setup and ongoing administration costs and employees may qualify for some tax benefits. In some circumstances, the seller can be eligible for lifetime deferral of capital gains tax, and the profit that is paid out as patronage is tax-deductible to the worker cooperative business.
- Employee ownership trusts: An employee ownership trust holds some or all of the shares of a company on behalf of the employees, ensures employees have a share in profits, gives them a voice in governance and holds that the mission of the business — and its jobs — can be preserved for generations, says Project Equity.
But the main benefits of converting ownership in Colorado include access to employee ownership resources. These include the Cash Collateral Support program which provides a cash deposit when employee buyers can’t meet a lender’s collateral requirements, and for qualified sellers, a tax credit that covers up to 50% of their conversion costs and up to $150,000 to offset their state income taxes.
Nikki Maloney, OEDIT’s director of business support, says the office is excited to see examples like Rocky Mountain Steel happening “because we think this could have tremendous long-term impacts on rural economic development.”
The Cash Collateral Support Program was activated with funding through the State Small Business Credit Initiative Program initiated by the U.S. Treasury, Maloney said. “We added special language to allow for activation with employee owned companies … so we’re really excited, because in the last few months, we’ve had the first two businesses that have layered both the use of the tax credit and the loan funding” — Rocky Mountain Steel and Sky Blue Builders, in Denver.
Through his studies, Wiman has learned how powerful employee ownership can be on a state, national and global level.
He’s also seeing in real time how it will benefit the employees of Rocky Mountain Steel.
Some of them have been with the company since it was founded in 1997.
“So for them to now be owners in this business, and for the time that they’ve spent with the company to be able to benefit in a much bigger way, I think it means a lot,” he said. “And I think the fact that Tim and Bernie decided to go this route as opposed to a more traditional one means a lot. Because selling to private equity, you never know what you’re going to get. You never know who the new owners are or what their intentions will be. So for the control of the company to now be in the employees hands, it means a lot to people.”
The future of Rocky Mountain Steel
Wiman, who became president of Rocky Mountain Steel when the company transitioned, says the 30 employees now own it through an ESOP.
Employee-owned companies using the Colorado Employee Ownership Tax Credit:
- Jax Mercantile CO
- Edible Beats
- Visual Interest
- Top Notch Logworks
- Apex Plumbing
- Empowered Energy Systems
- Zeitgeist, Inc.
- New Wave Enviro Products, Inc.
- The Brewing-Science Institute, Inc.
- The Baessler Group, PBC
- Sky Blue Builders, LLC
As stockholders, that means shares are distributed to each employee at the end of each year, he said. They don’t have to buy in and shares are distributed at no cost.
“And the company keeps the same structure as any traditional company. We have a board of directors and management team who help make everyday decisions, but when big decisions need to be made, all of the employee-owners will have the opportunity to share their opinions and everyone’s voice will be heard.”
“They put no money down, no personal liability, no personal guarantee,” he added. “There’s no risk to them at all.”
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