When Dan and Nancy Martin, founders of Martingale & Company in Woodinville, began thinking of retirement, they came up with a unique idea. Why not sell their publishing company to their employees?

Dan Martin explains, “In 1991, our company sales reached 2 million and Nancy and I decided we needed an exit plan. ESOP, which stands for Employee Stock Ownership Plan, seemed like a win-win. In December 2002, we sold 44 percent of our outstanding stock to our employees. They already owned 5 percent and that brought them up to 49 percent. This past June, 2005, we sold them enough stock to bring them up to 57 percent. Now the plan is for us to sell the balance of our stock in the next two years.”

Martingale & Company specializes in quilting and knitting books.

The company dates back to 1976 when the Martins launched a small home-based publishing business rooted in Nancy’s joy of quilting and teaching. They called their small company “That Patchwork Place.” Later, they renamed their business Martingale & Company, which has expanded to 47 employees and re-located to a 37,500 square-foot building on 144th Ave. NE.

The publishing house is nationally recognized today as the foremost publisher in the quilting industry, printing over 400 titles and selling 15 million books over the lifetime of the company. It all adds up to an annual $10 million in sales.

But as the business continues to grow, Dan and Nancy Martin plan to wind down from their ownership responsibilities at their burgeoning Woodinville company. In considering their exit options, the employee stock ownership plan seemed like the ideal strategy. “I’ve always been about ESOP,” says Martin. “To me it’s the new form of capitalism of the next century.”

Forty-five Martingale employees joined in on the plan, which calls for certain participation requirements such as one year employment. “Ownership doesn’t mean they run the company,” Martin clarifies. “It’s really a retirement plan. When the participating employees are close to retirement, they can diversify and sell back or invest in a 401K. Their risk is the company might not do as well as they dreamed.”

The advantage, he says, is that the employees have an invested interest in the company’s success. In addition, they are not taxed until shares are distributed and taxation on unrealized appreciation may be deferred until shares are sold by the employee.

Asked if the company had future goals of breaking into new areas of publishing, maybe add books on gardening or hiking to their line, Martin replies, “That’s up to the management team in charge of the strategic plan.”

Martin points out that he and Nancy chose to include ESOP in their overall retirement approach because it provides them the chance to help the employees who helped them get where they are today. It also affords them the opportunity to give their employees a great career path.

“I’ve enjoyed teaching the employees the value of ownership,” Martin says. “It’s a career they can enjoy getting up for and going to work to every morning.”