The problem

As baby boomer business owners retire, our local business landscape is poised to go through a dramatic shift. With boomers owning about half of all privately-held businesses in California, we will see a massive ownership changeover of locally-held businesses as the ‘Silver Tsunami’ of retirements approaches.

The vast majority (over 85%) of business owners do not have a succession plan in place, and increasingly, many are finding it hard to find a buyer when they are ready to sell.

As a result, some of these companies will quietly close down, a very small percent will be passed on to family members, others will sell to another local owner, and some will be sold to a larger company or out of area buyer. Those in this last category will likely lay off employees and will further concentrate ownership and wealth.

We have the opportunity to keep many of these businesses locally-owned for the long term and to deepen their positive impact on our local economy.

How? By helping them transition to broad-based employee ownership.

Why does this matter?

Small businesses are the lifeblood of our economy, making up 99% of all firms and providing 49% of jobs in California. Locally owned businesses circulate three times more money back into the local economy than absentee-owned firms or chain businesses. And local businesses are based on local relationships, fostering trust and civic engagement.

Employee ownership extends the legacy of these businesses while deepening their impact in our community. By selling businesses to the employees businesses remain anchored in the region while continuing to provide good jobs, enhance access to wealth and promote entrepreneurship.

What can we do about it?

We can all play a role in keeping businesses local and promoting employee ownership.

Raise awareness of the problem

We hear about the impact of baby boomer retirements on health care and on employment, but there is low awareness of the impact on local business ownership. Please share this information with your city government and others who can help.

• Local governments can measure the impact on their tax base by using business license data to track how many businesses are over 15, 20 or 25 years old.
• City and regional planners can convene local officials, business networks, lenders and others to determine how they are assessing and addressing this issue.

The benefits of broad-based employee ownership are clear, but most business owners do not know that selling their business to their employees is a great way to preserve its legacy.

• Business service providers can add succession planning to their service offerings and include employee ownership as an option
• Cities can add succession planning into their economic development goals and partner with organizations that provide education and expertise on employee ownership
• Regional planners can integrate the stabilization of local business ownership into their goals

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