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Good Switch for Switchback

Switchback Beer VatIn February 2017, the two owners and co-founders of one of the most popular breweries in Vermont sold their business. It was significant news throughout Vermont because the brewery was not sold to an out-of-state entrepreneur or “Big Beer,” but to the employees.

Bill Cherry and Jeff Neiblum sold 100 percent of Switchback Brewing Co. to the Switchback employees through an Employee Stock Ownership Plan. 

An ESOP is a business structure where employees purchase a company’s stock, which is held in an account for each individual employee. When an employee leaves or retires, they receive the stock and have the option to sell it on the open market or back to the company.

“Switchback is a Vermont beer and it was important to us that the brewery remain part of Vermont,” said Cherry. “The ESOP was a good option for our succession plan.  It allows us to stay involved in the business without the outside pressures that can arise from venture capital or a total buyout.  It also helps to maintain the brewery’s culture as is, and we get to keep working at the place we love. The ESOP option begins to cash us out while we are younger and can enjoy the fruits of our success.”

Cherry and Neiblum, who have been friends since college, always talked about opening a brewery.  Cherry, a master brewer, had experience working for both a microbrewery and large American brewing company, and Neiblum had experience running his own company.

When Cherry and Neiblum launched Switchback in 2002, Cherry was the sole worker. He was buying the ingredients, brewing the ale, selling it to his customers and cleaning the kegs.

From 2002 to 2012, the owners obtained several Small Business Administration guaranteed loans to expand.  In 2014, Cherry and Neiblum were named the Vermont Small Business Person(s) of the Year for growing their brewery, expanding the brand and increasing sales.

Today, the brewery occupies a 20,000 sq. ft. facility complete with a Tap Room, which hosts weekly events open to the public such as live music and yoga and special events. Its staff has grown to 30 people over the years, including a plant engineer, marketing specialists, accountant, retail manager, financial manager and brewers.  All of whom now have a stake in the brewery.

“ESOPs have a number of positive impacts,” said Matt Cropp, Vermont Employee Ownership Center Co-Executive Director. “They serve as a good exit option for exiting business owners that tend to keep jobs local. They also provide good jobs with the opportunity for the whole workforce to build equity in their employer, which creates more economic security in our communities.”

VEOC, a non-profit organization, has promoted employee ownership and counseled companies transitioning to ESOPs. According to VEOC, more than 40 Vermont companies are at least partially employee-owned, with the majority being 100 percent employee-owned.

In 2018, U.S. Congress passed the Main Street Employee Ownership Act, which made it easier for ESOPs to obtain Small Business Administration financing to cover the purchase price and some or all of the ESOP transaction expenses.

“Going ESOP is difficult and extremely complex.  In my opinion, the selling owners have to be dedicated to it on a personal level and they have to want it to be part of their legacy.  It isn’t often a native Vermont company can say that it will remain Vermont owned and operated forever. For me, I am far prouder becoming an ESOP than I would be accepting a big fat check from a large multi-national company,” said Cherry.

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