ESOP Poster Child: Holiday Builders

For Larry Sietsma, founder of Melbourne, Fla.-based Holiday Builders, selling his company to its employees through an ESOP proved the perfect exit strategy. For Richard Hawkes, who now runs the entry-level dynamo, it launched a growth curve of extraordinary proportions, with clear advantages in the here and now.

Sietsma started looking into ESOPs 10 years before his July 1999 retirement at age 60, about the time he put a 10% profit-sharing plan in place. "It was never a family business," he says. "We grew it with managers from outside the family. If you sell or go public, it creates turmoil with the staff. They are the people who built Holiday. They deserved a chance to keep it going."

Sietsma started with an ESOP covering 30% of company stock in 1996 and took it to 100% in 1999. He also holds the note that financed the deal. "He really has zero collateral except his stock," Hawkes says. "The money he lent the employees to buy this company is virtually unsecured. It takes a leader with a lot of faith in his people to do that."

Holiday's rapid growth seems to create a chance to pay down that debt long before it's due to expire in 2016. Hawkes and comptroller Kathryn Byrnes have not done it.

"We made a couple of extra payments on the principal a couple of years ago," Byrnes says. "Longtime employees saw their accounts double in one year from 2000 to 2001. If we paid down the principal, they might triple. We have to be careful how fast we release stock into people's accounts."