I was surprised to find that millions of profitable small businesses throughout the U.S. lack a formal, written succession plan.
“There are 3 million businesses at risk of closure,” said Sonali Kothari, co-founder of Zolidar, and former COO and CPO at Kiva.org (the international nonprofit working to build financial inclusion through microloans around the world). Zolidar is building what its founders refer to as an AI-powered “easy button” for employee ownership.
While I’ve come across the notion of employee ownership as it relates to partnership tracks within advisory firms themselves again and again, whether through succession planning sessions at conferences or M&A research, I’d never given any thought to whether there was technology to help employers or employees in navigating the potential that such ownership models can provide.
I met Kothari through outreach from Project Equity, a nonprofit organization focused on policy, education and advocacy related to employee ownership. As part of its educational mission, Project Equity works with professionals, including CFPs, CPAs, certified exit planning advisors, attorneys and others, who, in turn, work closely with business owners,
Project Equity has formed a strategic partnership with Zolidar, which is creating the technology infrastructure to make succession planning, including employee ownership transitions, accessible for the 80% of profitable small businesses that don’t find buyers through traditional M&A.
Zolidar is specifically a technology startup co-founded by Kothari and Ashish Agrawal in 2023. The two had met in 2006 while working as interns at Google. (Agrawal remained there until 2022.)
“We’re building the technology to serve this underserved market at scale,” Kothari said, noting that the AI-powered tools being built into Zolidar help advisors expand client conversations, convert awareness into action, and serve more clients with less time-intensive and manual work. “We joke sometimes that we got a master’s degree in employee ownership,” she said of the learning curve the two went through in studying every aspect of employee ownership, leading up to launching Zolidar.
“What we found is that employee ownership is not niche, it is just often overlooked as an option and lacks tools to help business owners and advisors in pursuing it as an option,” she said.
The 2023 State of Owner Readiness Report (the latest available), published by the Exit Planning Institute, shows that within the next 10 years, 75% of business owners would like to exit their business. In other words, approximately 4.5 million privately held businesses are expected to transition over the next decade—whether through sale, inheritance or closure—representing an estimated $14 trillion in wealth.
“On one hand, employee ownership can work today for businesses with 10 to 15 or more employees, up to large companies, but there are many more of these smaller companies,” Kothari said, noting that for many of them, it is the friction involved in figuring out next steps that is preventing the adoption of employee ownership, which is complex.
As one example, consider the numerous differences and intricacies between employee ownership trusts, the more heavily regulated employee stock ownership plans and co-ops, which represent three potential models a business could pursue.
“Our intent at Zolidar is to enable businesses to understand all their options,” Kothari said. “Technically, it may be the only exit option for some stable, healthy businesses.”
Currently, Zolidar’s platform is powering the preparation phase, where businesses or advisors can compare options, model sale or ownership scenarios (and grade and prioritize them based on the company they are working with), and conduct multi-method valuations of their businesses.
The site is already divided into products for business owners (or employees) and advisors who want to work with business owners. For advisors who do sign up, the site is intended to be a resource that is, in turn, shared with business owner clients if they want to explore for themselves or input some of their own information.
Many free resources are available on the website without registration, including The Grid, which is a directory that shows thousands of professionals, exit planning services, related organizations and nonprofits and other resources around the country that can be filtered based on six parameters from type to services offered, location and focus on employee ownership, among others.
I won’t go into all the tiers of pricing for both businesses and advisors, but an “Advisor Basic” subscription is $350 per seat per year, providing multi-client access and collaboration features for teammates and clients. The “Advisor Premium” subscription is $3,500 per seat per year, which provides unlimited valuation reports for prospects and clients. Both subscriptions offer discounts on the generation of Zolidar’s comprehensive succession plans called Business Max plans. Simply put, the pricing and what an advisor (or business owner) gets for it are transparent and exhaustive.
On the roadmap for Zolidar is building out the transact phase, which includes deal-team workflows and financing paths, followed by the operate phase (ownership, culture and post-transition tools).
In a nutshell, PE and Zolidar are tackling both the knowledge gap and the execution gap that have kept employee ownership from scaling, according to Kothari.
Zolidar occupies what appears to me to be a unique position in the succession planning technology ecosystem.
While platforms I’ve written about, including RISR and Capitaliz, serve financial advisors who already have business owners as clients, Zolidar is also focused on helping small businesses that likely lack an advisor and have no succession planning in place.
“We see them as complementary,” Kothari said, “They serve the established advisor market, while with what we’re building and through the partnership with Project Equity, we’re expanding the entire ecosystem to do things that previously required expensive specialists to do.”
