How Many ESOP "Sweet Spot" Companies Are There?

People working on employee ownership often ask us how many companies fit the "sweet spot" for an ESOP. The size when an ESOP is most likely to be appropriate is, broadly speaking, between 20 and 1,000 employees. According to the most recent census data, there are about 590,000 organizations in that range, and these companies employ about 40% of the private sector work force. There are about 8,500 companies with over 1,000 employees, and they employ about 42.5% of the private sector work force; companies with over 10,000 employees employ 27%.

Of course, many of the appropriately sized companies are not ESOP candidates. Many of those 590,000 organizations are ineligible for ESOPs because they are nonprofits or professional firms. (Generally speaking, law firms, accounting firms in most states, and medical practices, cannot have ESOPs, nor can companies such as real estate agencies that have contract employees.) It is difficult to gauge how many of these there are in the 20-1,000 employee range, but we suspect that they bring the number of "sweet spot" companies down to about 400,000.