This article speaks to an important issue that Growth Partnership and others are working on in Ashtabula County.
Small business owners are the lifeblood of the U.S. economy, but they are getting old. In fact, two-thirds of small businesses are owned by baby boomers, many of whom will soon retire. To help ensure rural companies don’t go out of business with the retirement of their founders, the University of Minnesota surveyed succeeding business owners in small communities to identify their challenges and what they need to thrive.
The survey found that banks/credit unions and accountants were the most important resources to new owners, even more so than support from the previous owner. Still, many reported a persistent challenge accessing credit.
Local government was not widely viewed as helpful, with just 27 percent reporting their city as very or moderately helpful. Economic development organizations can fill this void by helping proprietors create a succession plan, a document many business owners lack, the study found.
Benefits: The study reveals that new blood is often just what a small business needs, underscoring the value of retention and expansion efforts. The report found that 87 percent of businesses with new owners maintained or increased the number of employees and 68 percent grew sales and their customer bases.
Federal support for employee ownership: The U.S. Department of Agriculture has revamped its Business and Industry (B&I) Guarantee Loan Program to better finance ownership succession. Specifically, new rules make it easier for a business’s employees to take over under cooperative ownership. Now, the selling owner may remain partially involved in the business, thus lessening the financial burden on employee owners. The B&I program also provides loan guarantees that allow community members and local businesses to purchase preferred stock in cooperative businesses.
Employee ownership is an especially useful model for businesses that don’t have children or whose children are uninterested in taking over.