The transformation of one Arvada business into a 100% employee-owned enterprise was accomplished with the help of an investment fund that backs the conversion of companies with substantial workforces of color.
Apex Plumbing at 4420 W 58th Ave. has served the Denver area since 1985. Its labor force is made up of about 50 employees – around half of whom are Latino.
As of early June, its employees took over ownership, with social impact private equity firm Apis & Heritage Capital Partners leading the transition. “Closing the racial wealth gap is why we created A&H,” said Phil Reeves, founding partner, in a statement.
Since 1970, the income disparity between white and Black Americans has endured, with the median U.S. household income standing at $84,600 for the former and $51,600 for the latter in 2018, according to Pew Research Center. The total racial wealth gap amounts to over $10 trillion, the Brookings Institution reports.
Longstanding racial inequities also play out when it comes to accessing capital, which includes personal and family savings, business loans from banks and personal credit cards. “Minorities are disproportionally hurt by the cost of and lack of access to capital,” according to the Ewing Marion Kauffman Foundation.
“I think employee ownership will offer more opportunities for advancement,” said Elise Justice, a 30-year-old scheduler who’s worked at Apex for over four years.
While everything feels the same right now, she’s “looking forward to seeing not only how it affects me as an individual, but how it helps the company grow.”
Justice, who lives in Fort Lupton, first started in an administrative role, then grew into her current position. The changes she’s most excited about include a 401(k) plan, new equipment and more crews, she said in an email.
Apex isn’t the only Colorado business to embrace employee ownership. About 100 other companies in the state are employee-owned, including Denver restaurant group Edible Beats, according to the National Center for Employee Ownership, a nonprofit membership and research organization.
Data shows “employee-owned businesses are more productive, more profitable, better places to work,” said Michael Brownrigg, cofounder and partner at A&H. “But, right now, many, many people don’t know about employee ownership or they’re skeptical about it.”
In the U.S., the most common method of employee ownership is an employee stock ownership plan, which is considered a type of retirement plan, NCEO reports. Around 6,500 companies nationwide use this plan, with about 14 million workers participating.
“The main benefit of employee ownership is that it gives employees the ability to benefit from the success of the company, often in the form of the value of company stock,” according to NCEO.
A&H also utilizes an employee stock ownership plan, using its “employee-led buyout” model. The firm, which is Black-owned, finds and purchases privately-held businesses with $1 million to $4 million in earnings before interest, taxes, depreciation and amortization, and at least 40 employees – at least one-third of which identify as people of color and half of which are considered low-income, according to A&H’s website.
Then, the transition into 100% employee-owned businesses takes place. Companies of interest typically fall in the manufacturing and essential service sectors, including maintenance, landscaping, cleaning, food processing and more.
Brian Wilkie, Apex’s original business owner, said, out of the potential offers he received for the company after putting out a marketing plan, A&H approached him with one that he considered “really intriguing.”
Since leaving the business to family wasn’t an option, a concern at the top of his mind was “how would our long-term employees fare in a sale, a transition to an equity buyer.”
A&H’s offer “right off the bat struck us as something that might really be beneficial for the employees,” Wilkie said.
His transition out of the company will be gradual, as he remains the CEO for now with a 12-month contract, he said. Wilkie will then stay on the company’s board for the next few years.
Eventually, he hopes to retire outside of Nashville, as some of his wife’s family lives in Tennessee and they bought property in the state.
When asked whether other company owners should follow his lead with A&H, Wilkie said, “I don’t really see much of a downside.”
“You can feel really good walking away, knowing that your employees have a lot to look forward to and are gonna continue to get rewarded for their efforts,” he added, noting that several recent applicants were attracted to his company because of the transition to employee ownership.
Another business owner who plans to retire in Ecuador has already approached him with interest in A&H, Wilkie said.