There is a saying: Never let a crisis go to waste. Now is the time to leverage the sense of urgency accompanying COVID-19 to develop long-term solutions for making Central Ohio’s economy stronger, more resilient, and likelier to withstand whatever’s thrown at us next.
Even before the pandemic, Central Ohio’s small businesses were running straight into the headwinds of the Silver Tsunami. That’s the colorfully dramatic term for baby-boom business owners trying last minute to figure out if and how their businesses will outlast them when they haven’t done anything resembling a succession plan. Which is a big deal, since 80 percent of small businesses have no succession plan. And no succession plan means the real possibility that the company disappears.
The Ohio Employee Ownership Center (OEOC) found 1,655 Franklin County businesses — with a combined workforce of nearly 55,000 jobs — at risk of going away when their Baby Boom owners retire, sell, or die. But the good news is this once-in-a-generation COVID/Silver Tsunami collision offers Central Ohio an opportunity to fortify small businesses and the workers who build them.
Here’s how and why: One of the most effective but least utilized ways to improve small business survival odds is to convert more of them to Employee Stock Ownership Plan companies (ESOPs) or worker cooperatives. That’s because worker-owned companies are 25 percent more likely to stay afloat in bad times than traditional closely held businesses.
Worker-owned companies also have higher growth rates, hire more people and trigger virtually no loan defaults. Maybe that’s because highly motivated worker-owners retire with 2.5 times the asset value compared with their counterparts who retire from traditional businesses, giving worker-owners a whole new level of commitment to their companies’ success.
Central Ohio political leaders and economic developers need to look closely at the expansion of worker owned businesses as a mainstream business retention strategy and a critical measure of the region’s economic development success. And we can meet this critical measure by making central Ohio the national leader in converting Silver Tsunami businesses into sustainable worker-owned enterprises.
We need to act, because the demographic clock is ticking. COVID is putting pressure on business owners to come up with survival solutions fast.
It’s time to help Silver Tsunami businesses structure worker buyouts so that those businesses become long-term community assets. And here’s how central Ohio political leaders and economic developers should immediately begin work on a strategic initiative with business groups, financial and legal services firms, worker ownership advocates, and others to:
• Identify and prioritize businesses — with particular emphasis on minority-owned firms — most at risk of vanishing when the owner moves on.
• Determine the specific challenges that stand between these businesses and worker ownership.
• Provide these businesses with in-kind and low-cost legal, financial, and technical assistance in exchange for their commitment to converting quickly
• Strengthen grant, taxation, public contracting, loan, and other programs to encourage worker ownership. Sustainable economic development is firmly rooted in business resilience and worker equity.
In other words, it’s time to build back better.
Brian Morris operates Morris Communications, a Columbus marketing/public affairs firm. He serves as Chair of the Workforce Development Board of Central Ohio’s Business Solutions Committee.
This article originally appeared on The Columbus Dispatch: Column: Boomer biz retirements can bring opportunity