Small business owners in Long Beach in operation for 20+ years know the effort it took establishing, growing and sustaining your businesses through the years. You may also know how running a business in a port city has been critical to the region's small business economy. From the trusted partners and suppliers you've amassed, to the long-time employees whose day-to-day presence feels more like family, it will be difficult to walk away when you decide to retire.
But, before you do, the option of transitioning your business to an employee-owned company is a critical one to consider. Not only will employee ownership keep your business in operation and firmly rooted in the Long Beach community, but selling your business to your employees — through a third-party funded transaction — provides you with a market rate return and allows you to sell according to your own timeline and according to terms you dictate. All while sustaining the business legacy you accumulated and rewarding your long-time loyal employees with ownership and greater job security.
Long Beach is already home to many successful employee-owned-businesses, and creating others is proven to offer thousands of employee-owned company's stable sources of employment and wealth creation in the United States.
The significance of small businesses in Long Beach is immense. For example, they generate $12.3 billion in revenue and provides 46,700 jobs, (according to data researched by Project Equity) in the city, which will be at risk if owners chose to close businesses. And, if you assumed owners' children and other family members take over ownership, you might be surprised to learn that only a fraction of them do. There are not nearly enough qualified individuals available to buy and run these businesses. What is likely is the possibility that outside corporations or private equity will come in to purchase these businesses, which serves only to accelerate the growing wealth concentration for a few. These results will arise from what I call a "Silver Tsunami" of retiring boomers who will negatively impact employment, future opportunities, and the local economy for the Long Beach community.
The option of employee ownership lessens the impact of the Silver Tsunami by empowering employees to become owners of these companies, through Employee Stock Ownership Plans (ESOPs) or worker-owned cooperatives. These strategies can reinvigorate the American dream with a new chapter of expanding ownership. With the support of the city of Long Beach, Citi Community Development, and Local Initiatives Support Corp (LISC LA), a proactive approach to assist locally-owned businesses with thoughtful planning of their ownership succession is getting the attention it deserves. The transition to employee ownership requires guidance to help owners structure a well-managed exit, and technical assistance and training to prepare a new general manager to lead the team and develop an ownership culture.
In early September in Long Beach, my organization, Project Equity, just celebrated the public launch of a new collaborative initiative that now enables Long Beach businesses to finance the sale of their business to their employees. Accelerate Employee Ownership pairs flexible small business financing from a national CDFI, Shared Capital, with Project Equity’s hands on support and advising services.
Already, Project Equity's work with several Northern California retiring small business owners has proven successful. Now, with Accelerate Employee Ownership initiative adopted in Long Beach, small business owners are poised to achieve the same making it the largest business succession planning effort in Southern California, and underscoring the point that there's no need to rush to close your small businesses just because you've decided to retire.
Evan Edwards is the director, Strategic Partnerships & Business Engagements, at Project Equity.