The silent risk of the Silver Tsunami

Baby boomers (those born between 1946-1964) own half of all businesses with employees in Santa Clara. Cities and regions need to understand the risk of the Silver Tsunami as these business owners retire. Many of these legacy businesses will sell to out of area buyers or close down due to lack of succession planning.

Santa Clara’s proactive approach

The City of Santa Clara launched its Worker Cooperative Initiative to assist locally owned businesses that are at risk of closure to learn about the option of employee ownership. The initiative highlights the need for succession planning for local small businesses and focuses on transitions to employee ownership to address hundreds of Santa Clara business owners’ potential retirement.

The proof is in the numbers

Project Equity performed an analysis to quantify the number of privately held companies with employees in Santa Clara that are 20 years old or older — a good indication that they need succession planning — and the impact if these businesses are not retained.

There are 1,138 companies in the city of Santa Clara that met that criteria. These longstanding Santa Clara businesses represent fewer than 20% of the businesses in the city, yet they

• employ an estimated 20,000 individuals, or 1 in 3 private sector employees in the city.
• generate about $6.2B in revenue or 57% of small business revenue.

Local ownership over the long-term

Keeping companies locally owned over the long term is a critical economic development strategy. Only 15% of businesses get passed onto the next generation because many children today are not interested in taking over the family business. According to BizBuySell, the largest online marketplace for businesses, only 20% of businesses listed for sale ever sell. We clearly need more strategies for local business succession to avoid businesses inadvertently closing their doors due to lack of planning. The good news is employee ownership is a viable path for many companies.

Employee ownership may be unfamiliar to many, but it keeps companies rooted in place, provides quality jobs and strengthens businesses for the long term. It also offers a ready solution to the retiring business owner: there’s a buyer right there under your nose — the very employees who helped you build the company.

Local ownership is important to Santa Clara’s future. Let’s make sure that, as baby boomers retire, the businesses they created live on.