How a National Painting Contractor Created Employee Millionaires Through ESOP

Gary Gray had built something impressive. Graydaze Contracting had grown from humble residential painting beginnings in the early 1990s to become one of the top five largest commercial painting contractors in America. With 650 jobs completed per year, 150 crews nationwide, and specialization in warehouse distribution centers and data centers, the company was a true success story.

But Gary faced a challenge that keeps many successful contractors awake at night: how do you exit your business while taking care of the people who helped build it?

Seven years after implementing an Employee Stock Ownership Plan (ESOP), and with CEO succession to Alec Kennard complete, Graydaze's story demonstrates how employee ownership creates lasting value for everyone involved.

When Internal Sales Don't Work

Gary's original plan was straightforward: sell to key employees through management buyouts. It seemed logical, but reality proved more complicated.

As the business grew in size and value, internal sales became increasingly difficult. Early partners could purchase meaningful equity stakes at reasonable prices, but later buyers faced a harsh reality. They could only afford minimal ownership percentages despite making substantial personal investments that strained family finances.

The breaking point came when Gary realized he was forcing good employees to choose between home purchases for growing families and buying into the company. Personal debt burdens were becoming overwhelming, and the financial stress was counterproductive to the company culture he'd worked decades to build.

Discovering the ESOP Solution

Through networking and research, Gary discovered ESOPs offered everything he wanted: fair market value for his ownership without placing debt burdens on employees. The structure aligned perfectly with Graydaze's core purpose of "creating opportunity for uncommon success."

The tax advantages sealed the deal. As a 100% S-corporation ESOP, Graydaze eliminated corporate income taxes entirely, providing approximately 40% additional cash flow for reinvestment, growth, and debt reduction.

Real Results Seven Years Later

The numbers tell a compelling story of what employee ownership can accomplish:

Financial Performance:

• Revenue exceeded $120 million annually
• All transaction debt eliminated within five years
• Company doubled in size twice over five years
• Tripled W-2 count since ESOP implementation

Employee Wealth Creation:

• 40 employees accumulated over $150,000 in ESOP accounts
• Multiple 30-year-olds exceeded $500,000 in ESOP value
• Company committed to creating "ESOP millionaires" with seven-figure retirement accounts

Operational Excellence:

• Four distinct divisions with specialized market strategies
• 800 annual job sites managed nationwide
• Maintained top-five national ranking in commercial painting

The Culture of Ownership in Action

What impressed Gary most wasn't the financial performance, but how employees embraced ownership thinking. Workers began turning off unnecessary lights while saying "EBITDA," understanding their actions directly impacted company value and their retirement accounts.

The company maintains complete transparency around financial performance, discussing EBITDA monthly with all employees. This open-book approach helps everyone understand how their specific roles drive business results, from cost savings to customer retention.

The ownership mindset shows up in practical ways across 800 annual job sites nationwide, with employee-owners implementing cost-saving measures and thinking strategically about long-term customer relationships rather than just completing individual projects.

Successful CEO Succession Through Employee Ownership

The transition from Gary to Alec Kinard exemplifies how ESOPs enable successful leadership succession. Alec's progression from project manager to CEO occurred over several years, including opening and growing the Salt Lake office to $20 million in revenue.

The ESOP structure provided crucial advantages during succession:

Retained control: Gary maintained oversight during transition planning, ensuring both business and incoming leader were prepared

Gradual timeline: Leadership development occurred naturally over years rather than forced rapid transitions

Internal pipeline: Executive team expanded from two founders to four-person leadership structure, with over half promoted from within

Gary named Alec CEO in 2022 while working alongside him for two years before completely exiting operations. This gradual approach ensured continuity and prepared the organization for sustained success under new leadership.

Competitive Advantages of Employee Ownership

Graydaze leverages the ESOP as a powerful talent management tool. When competing job offers are otherwise equivalent, employee ownership provides inherent advantage through equity participation over time.

The "ESOP millionaire" strategy creates long-term retention incentives that surpass typical construction industry benefits. Workers understand they're building substantial wealth through their daily efforts, not just earning paychecks.

Tax-free cash flow enables aggressive investment in research and development, risk-taking for growth opportunities, and enhanced employee compensation and benefits that traditional contractors struggle to match.

Lessons for Other Contractors

Both Gary and Alec emphasize critical success factors for contractors considering employee ownership:

Start early. Business owners should begin succession planning at least ten years before intended exit, allowing sufficient time for leadership development and cultural preparation.

Invest in leadership. Successful ESOPs require robust internal leadership pipelines. Founders must develop next-generation leaders capable of sustaining and growing the business.

Culture comes first. ESOPs enhance existing strong cultures but cannot fix fundamental problems. Companies must establish solid operational foundations before implementing employee ownership.

Building Something That Lasts

Graydaze's experience demonstrates that employee ownership creates sustainable competitive advantages beyond the original transaction. The combination of tax benefits, cultural transformation, and wealth creation makes ESOPs particularly well-suited to construction industry challenges.

For contractors facing succession planning decisions, Graydaze's journey proves that employee ownership provides a proven pathway for preserving company culture, rewarding contributing employees, and maintaining growth trajectories. The key lies in early planning, leadership development, and commitment to the cultural transformation that employee ownership enables.

Gary's vision and Alec's execution show that well-implemented ESOPs create lasting value for all stakeholders while building construction businesses positioned for sustained excellence in competitive markets.

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