October 29, 2018; MaineBiz
Two months ago, NPQ profiled an initiative supported by US Department of Agriculture (USDA) grants to encourage retiring business owners to sell their businesses to their employees in Oregon, Washington. Now a similar initiative, named the Ownership Transition Initiative, has been launched in Maine, also with USDA support.
As MaineBiz reports, “The Cooperative Development Institute has received two grants totaling more than $400,000 in public and private funds to support business ownership transitions in rural Maine.” Specifically, this includes a $200,000 grant from the John T. Gorman Foundation and a $215,000 Rural Community Development Initiative grant from USDA. The drive to implement the initiative comes from the fact that nationally, baby boomers own 2.34 million businesses, which employ 24.7 million people and have combined annual sales of $5.14 trillion. And Maine, the state with the nation’s oldest population, is affected more than most. Nationally, it is estimated that four in five businesses lack a succession plan for when their owner retires or, if misfortune falls, dies unexpectedly.
In short, the need for business succession support in Maine is high. Selling family businesses to employees is a way to enable older business owners to retire with a nest egg, while preserving jobs—and creating business ownership opportunities—for Maine’s workforce.
The initiative is centered in what Mainers often call the “down east” section of the state in Washington County. Other partners in the initiative include the Sunrise County Economic Council, Axiom Education and Training Center, Eastern Maine Development Corp., Acadia Capital Management II Inc., and Husson University’s Center for Family Business. In Washington County, the partners estimate that there are 484 businesses whose owners are nearing retirement age. These businesses employ 3,750 workers—half of all the county’s private sector jobs—yet fewer than 20 percent of business owners have a credible, documented exit or transition plan.
Sign up for our free newsletter
Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.
The Ownership Transition Initiative aims to change that by educating business owners about planning for retirement and exiting their business. The partners intend to offer “workshops on selling a business, family business transitions, employee ownership transitions, financial analysis and business valuation, and other topics,” notes MaineBiz. The website also contains a host of case studies and articles in a neatly organized electronic library.
“The default succession option for business owners nearing retirement is, all too often, to reluctantly liquidate and close. This option shortchanges owners and drains the communities’ access to jobs and economic activity that the business provided,” says Rob Brown, director of CDI’s Business Ownership Solutions program, which provides technical assistance and has already helped convert some Maine businesses to worker cooperatives, such as the Rock City Cafe in Rockland, Maine.
Last August’s passage of the Main Street Employee Ownership Act at the federal level gives a significant boost to these efforts. As NPQ reported at the time in an article highlighting the historic nature of the nation’s first federal employee-ownership legislation in over two decades, “The new law expands US Small Business Administration loan guarantee programs for employee ownership conversions and requires SBA and Small Business Development Centers to make available education and training for employee ownership conversions.”
Kitty Barbee, who directs business services and lending for Eastern Maine Development Corp., the official workforce development agency for Washington County, told MaineBiz that the Ownership Transition Initiative offers a comprehensive approach. She said, “[It] will provide business owners with the succession planning assistance needed to sustain these rural businesses, provide workers with new skills that will improve profitability, and sustain economic activity and access to goods and services in rural communities.”—Steve Dubb