Case Study: How EMI Schemes help attract talent & accelerate value

For many SME owners, growth ambitions are often held back by one simple issue: attracting and retaining the right people. Senior hires can transform a business, but when you’re competing with larger employers and deeper pockets, you need something compelling to set you apart.

One of the most effective tools we see for companies with turnover around £2m and profits around £250k is the Enterprise Management Incentive (EMI) share scheme.

EMI is a tax-efficient, HMRC-approved, flexible way to reward and retain key people, without giving away control or taking on unnecessary costs.

Starting Point: The ideal SME

A typical SME that is perfectly placed to benefit from the EMI scheme could look something like this. (Of course, this is just an example and falling outside of these criteria doesn’t mean EMI isn’t viable).

Profits of £250k
Turnover of £2m
A team of 12 employees

The founder had ambitious plans to scale the business over the next 5-10 years but needs to bring in 2 senior hires to accelerate growth.

The challenge? Larger competitors were offering significant remuneration and long-term incentives. To stand out and ensure new hires were invested in the company’s success, the business decided to implement an HMRC-approved EMI share scheme.

Valuation & Setting Up the Scheme

As part of the EMI process:

Qualification: Advisers confirm the company and employees qualify for the scheme, with HMRC advance assurance where necessary.

Valuation: Advisers agree on a discounted valuation for minority shares, reflecting the fact that small shareholdings carry limited control and liquidity. In this example, EMI options over a 2.5% shareholding might be valued at just £2,500.

Certainty: The valuation of the business and minority shareholding is submitted to HMRC and agreed upon in advance, giving certainty on the option's value and tax position.

Granting: The scheme is tailored to grant options to the two senior recruits at a low cost.

This gave the new hires a powerful long-term incentive without the founder giving up meaningful control or voting power.

Unlocking Growth & Value

The EMI scheme aligns the senior team with the founder’s long-term plan. Over the following years:

The new hires remained motivated and embedded within the business.
Strategic projects accelerated due to stronger leadership capacity.
Turnover and profitability grew year-on-year.

The company reached a target valuation of £10m within 10 years, the number the founder had been aiming for. This could only be achieved due to recruiting the 2 senior hires who unlocked significant shareholder value for the founder.

At exit, all shareholders benefited from the uplift in value. The company achieved a higher profit multiple due to a motivated and "locked-in" management team, increased profits, and the "size premium" attracting larger and more experienced investors.

Benefits to the Founder & Company

Implementing the EMI scheme in this instance drives tangible outcomes:

Increased business valuation driven by improved leadership and performance.
Higher profit multiple on exit due to strengthened management and stability.
Access to tax reliefs, including possible corporation tax deductions on exercising the options, which in this example could yield tax savings of over £100,000! This tax saving in isolation would pay for the set-up costs of the scheme many times over.
Greater retention at a senior level, reducing disruption and risk during the growth phase.
Realising Investment: Reaching the target exit valuation enables the founder and early shareholders to realize their investment.

The cost of setting up the scheme turned out to be a strategic investment rather than a compliance cost.

Benefits to the Employees

For the senior hires, the EMI scheme becomes a clear part of their long-term reward:

They acquired shares for a negligible amount under the EMI rules.
On exit, each EMI shareholder with 2.5% received around £250,000 tax-efficiently due to the growth in the business from the £2,500 purchase price.
Ordinarily, Business Asset Disposal relief only applies to shareholdings of at least 5%, but there are special concessions to allow EMI shareholders to hold a lower percentage and qualify for the lower rate of capital gains tax. This is likely to save around £25,000 tax for each shareholder maximising their post-tax proceeds.
The shares were subject to performance and service criteria. This means if they had left early, the value would have been forfeited.

This alignment ensures both hires stay for the long haul and remain focused on driving results.

Flexible Protection Built In

EMI schemes can be designed with strong safeguards, including:

Performance conditions
Vesting linked to hitting revenue or profit targets
Good leaver / bad leaver provisions
Clawback mechanisms

This gives founders comfort that shares can be recovered or cancelled if something doesn’t work out.

Common Concerns About EMI Schemes

Many SMEs initially hesitate when it comes to EMI schemes due to valid concerns. Here is how we address them:

“What if the employee leaves and I can’t get the shares back?”

EMI options are often exercised at an exit, and leaver clauses protect the company.

“I don’t want to give away control.”

EMI options don’t need to carry voting rights and are often structured as a very small minority holding, say 1%-10%.

“I’m too small for a share scheme.”

EMI is designed precisely for growing, entrepreneurial SMEs.

Are EMI schemes expensive to set up?

This is the most common hesitation, but it is important to look at the comparative cost of not having a scheme.

Consider the cost of recruiting a senior hire on a £100k+ salary. You are likely facing recruitment fees of 25%–30% excluding VAT just to get them through the door. If that person leaves after 18 months because a competitor offers them equity, that recruitment fee is lost entirely.

Disruption from lost client contacts, cultural impact, and stalled growth caused by losing a key leader can be considerably worse for shareholder value than the cost of the hire itself. Quantifying the financial impact on these consequences is subjective but significant, nonetheless.

An EMI scheme costs a fraction of a single recruitment fee to set up, yet it locks in your key people for the long term and can be set up for multiple employees. It is significantly cheaper than the cycle of "recruit-lose-replace."