October 27, 2019; Spokane Journal of Business
NPQ has written before about the impact of what is often called the “silver tsunami” of pending small business closures as baby boom business owners retire, most of whom (about 85 percent) lack heirs willing to continue operations. Employee ownership has often been posited as a solution to this problem. Indeed, last year Congress passed a law designed to make to conversions to employee ownership easier.
But how is this transition playing out on the ground? In the Spokane Journal of Business, Kevin Blocker takes a look at Washington state’s largest eastern metropolitan area. As Blocker notes, a recent study by Project Equity, an Oakland, California-based nonprofit, found that “in Spokane County, an estimated 3,850 baby boomers—those born between 1946 and 1964—own and operate businesses. They employ 33,440 workers, have a combined estimated payroll of $1.18 billion, and generate close to $6.1 billion in sales.”
Blocker profiles three of these 3,850 businesses. Blocker writes:
Ronald Brown plans to travel and do more photography after he finishes selling off inventory at Brown Building Materials, the East Spokane surplus store he’s operated since the late 1980s.
Merrilee Lindaman wants to spend more time tending to her honeybees and 10,000-square-foot garden at her home on the Little Spokane River, after she closes Lindaman’s Gourmet-to-Go, the popular South Hill eatery, at month’s end.
Alan Bisson isn’t ready just yet to close the doors at Spokane Valley Sportscards, and he hopes he doesn’t have to. Within the next couple of years, he hopes to be handed a “big check” from a new owner so he can “gladly hand them the keys.”
As Blocker explains, “With some Spokane business owners, it isn’t as simple as being able to find the right buyer. Brown says he didn’t attempt to sell, and Lindaman says she didn’t want to sell.” For Brown, this has to do with running a line of business—selling new and used building materials to general contractors and do-it-yourselfers—that he sees as being increasingly marginal economically. For Lindaman, “The idea of selling my name just felt uncomfortable to me,” and her preferred method of preserving the family business legacy is to wind the business down. Lindaman tells Blocker that almost all of her 15 employees have found work elsewhere.
Still, certified financial planner Sarah Carlson contends that many small business owners in Spokane do want to have their businesses around after they depart. For them, succession planning—including selling the business to existing workers—could be a valuable strategy to preserve many of those 33,000-plus community jobs.
The Project Equity report, notes Blocker, includes suggestions both for financial planners like Carlson to include employee ownership as an option in their succession planning, and for local city governments to add succession into their economic development goals and partner with organizations that provide education and expertise on employee ownership.
As for Bisson, the sporting card retailer, unlike Brown and Lindaman, he says that he hopes that he can secure a buyer over the next couple of years. “The thought of trying to liquidate all this is daunting,” he adds.—Steve Dubb