Sandy King was in need of a succession plan.
Since 2007, she’d been the sole owner of family business Symbiont Service Corp., an Englewood-based geothermal and traditional pool heating and air-conditioning company started by her father, Roy, in the 1980s. But as her 60th birthday loomed this upcoming June, King wanted to get a retirement plan in place.
‘To walk away after 26 years with Symbiont without making sure the employees are taken care of would be counterintuitive to my business philosophy.’ Sandy King, Symbiont Service Corp
No other family members expressed interest in taking over the company. She could try to sell the business — but she wasn’t sure that was the right solution.
“I was concerned about selling to a third-party person who didn’t really know our culture and our people, and who would come in and start changing things around,” says King, who’s worked at the company since 1996. “I recognized that the strength of the company is its employees, and I wanted to do right by them. I didn’t want to have a succession plan that only took care of me. I wanted it to be symbiotic and take care of the employees too.”
So she worked with M. John Burgess, an attorney at Shumaker, Loop & Kendrick in Tampa and Sarasota, to transition the business to an employee stock ownership plan (ESOP), selling 100% of her shares of the company to a trustee representing its 64 employees. It’s a move she knows would be appreciated by her father — who not only founded the company but also designed the Symbiont geothermal pool and spa heater it sells and installs.
“He was very strong with taking care of the employees,” she says. “The whole Symbiont name represents a symbiotic relationship with our employees, our customers, our community, our vendors, the environment, all of those things. To walk away after 26 years with Symbiont without making sure the employees are taken care of would be counterintuitive to my business philosophy.”
An ESOP is essentially a type of qualified retirement plan for employees, says Burgess. “But instead of with a 401(k) that’s investing in mutual funds, [an ESOP] is primarily invested in company stock,” he says. Employees can own 100% of the company, like at Symbiont, or a smaller percentage of the business. Employees are typically given shares tied to their service time and compensation at the company, which are held in an account for each employee in the ESOP trust. When vested employees retire, their benefit from the plan is usually paid in cash based on the value of the stock, says Burgess. The better financial shape the company is in, the higher the share price will be.
The transition to an ESOP was about an 18-month process for Symbiont Service Corp., starting with determining the value of the company. For that, King worked with Phillip Hayes, succession planning partner of Florida CPA firm Berman Hopkins and host of “The ESOP Guy” podcast. “If it wasn’t for him, I would have had trouble pulling this whole thing off,” she says.
The company took out a bank loan that funded a percentage of the purchase of King’s shares, and for the rest she took a seller’s note from the company for which she’ll be paid back over several years. Selling to a third party would have given King a chunk of cash right away, but she believed enough in the ESOP concept to be willing to wait. She has an employment agreement to remain in her role as company president for four years, with the option to renew every year after that.
Symbiont Service Corp isn’t alone in making the move to an ESOP. According to data from the National Center on Employee Ownership, there are about 6,482 ESOPs in the United States covering some 13.9 million participants. NCEO ranks Lakeland-based Publix as America’s largest majority employee-owned company.
In addition to the benefits for employees and the employer, ESOPs offer important tax advantages. “Symbiont is 100% owned by its employees, so there are no income taxes on any earnings for the company going forward,” says Burgess. Symbiont is now taxed as an S corporation, he says, which means its income gets passed up to its shareholder, which is now a tax-exempt entity. “That’s a big advantage a lot of people don’t think about from a tax standpoint,” he says. “ESOPs are really, really tax efficient.”
Symbiont is working to educate its employees about the benefits they’ll receive from the ESOP transition, and King believes they’ll soon understand how the company’s success is tied to their own. “I feel like everybody is going to take ownership even more than they already did because they truly will be shareholders,” she says.
Employees are taking ownership at a time of major growth for Symbiont. After hitting record-breaking annual revenue of $9.4 million in 2019, the company had a dip in 2020 to $8.1 million due to the pandemic. But the business bounced back in a big way in 2021, setting a new company best with more than $13 million in annual revenue.
Florida’s hot real estate market is contributing to business at Symbiont, with more people investing in their homes and outdoor spaces as a result of spending so much time there during the pandemic. Symbiont also purchased the assets of Sharkey’s Air in Charlotte County in March 2021, with the contingency that it employ at least seven out of Sharkey’s nine employees. All nine still work for Symbiont today. “We bought the company because we really needed the employees because of the growth,” says King. “And with that came a lot of new customers.”
There are challenges in the current environment, like supply chain issues and finding needed trucks at a reasonable price. Additional acquisitions are a possibility to keep up with staffing needs and growth. “We’re on the right track,” says King. “We’re busy, we’re doing well, and we have a lot of business. There’s a lot going on, and we have a lot of potential.”