Multimillion-dollar fund will bring a sale to employees within reach for retiring business owners, maintaining their legacy and saving jobs
CINCINNATI--As business owners across the region agonize over how to keep the lights on during the COVID-19 pandemic, and the wave of business owners approaching retirement consider shuttering even sooner than planned, Co-op Cincy and the Seed Commons national cooperative announce a groundbreaking program to save jobs and businesses. The Business Legacy Fund will allow retiring business owners to preserve their legacy and secure their retirement--all while saving jobs and providing a pathway to ownership for their employees.
“The Business Legacy Fund will be a powerful tool for helping retiring business owners to save jobs, secure their retirement,” said Cincinnati City Council member Greg Landsman, “and help us create a more stable and resilient economy.”
More than 40% of the country’s small business owners are 55 and older, and the majority of them have poured their savings into their companies (WSJ). According to the U.S. Chamber of Commerce, 3 in 5 small businesses are now worried about having to close permanently. Small businesses account for 44 percent of all U.S. economic activity, and closures on such an immense scale could devastate the country’s economy (SBA and NYT). Even before the pandemic, only 15 percent of businesses successfully transitioned to the next generation of the family, and only 20 percent of commercial listings actually sold, with most facing liquidation and closure instead (Cooperative Development Institute).
“During these unprecedented and turbulent economic times, it is more important than ever to invest in building regional economic resilience and stability for our communities,” said Roy Messing of the Ohio Employee Ownership Center at Kent State University. “Our research suggests that even before the pandemic, more than 5,500 Southwest Ohio businesses were at risk of closing due to a lack of a viable succession plan. Now that risk has increased dramatically.”
Permanent closures increased by 3 percent overall in the last half of June, the highest rate so far (NYT). The situation is even more dire for business owners of color, as well as the workers and communities they support. CBS reported a 41 percent decline in Black business owners from February to April, and a 32 percent drop in Latino business owners, compared to a 17 percent decrease in white business owners.
Responding to the risk, Co-op Cincy has partnered with the Seed Commons national financial cooperative to create a multimillion-dollar continuity fund for small and mid sized businesses. The fund, and accompanying technical assistance from Co-op Cincy, will help business owners design a viable succession plan, to transition their businesses into worker ownership.
Worker-owned businesses boost local economies and provide greater stability to their communities and their regions because:
Worker-owned businesses are less likely to fail than traditional businesses
Worker-owned businesses report higher worker satisfaction
Worker-owned businesses pay higher wages
“Worker cooperatives are efficient businesses, and more resilient than traditional businesses,” said Flequer Vera, Co-founder of Co-op Cincy and CEO of Sustainergy Cooperative, “That’s why Sustainergy was highlighted in a national article about the resilience of worker co-ops during the pandemic. Every community should have a foundation of worker-owned businesses to create a base level of economic stability for the region and its workers.”
Interested business owners should apply by November 15 for the inaugural cohort. Successful applicants will receive technical assistance valued at up to $20,000. The team will assess the feasibility of an acquisition, followed by a gradual transition to worker ownership, to be aided by seasoned managers. Participating companies will then be considered for the fund’s financing program to help them transition to worker ownership.
Applications for the 2021 cohort are due November 15, and available at BusinessLegacyFund.org.
The Business Legacy Fund is actively seeking locally-owned companies to apply for the first round of funding, which will become available in 2021. Through a sophisticated combination of financing and technical assistance, the Business Legacy Fund will help Southwest Ohio’s retiring business owners preserve their legacy and ensure their retirement, by selling their business to their employees. The fund is expected to stabilize jobs and economic conditions in our communities.
Co-op Cincy is a non-profit cooperative business incubator that creates an economy that works for all. Since 2011, Co-op Cincy has worked with groups of entrepreneurs, organizations and retiring business owners to create and sustain worker- and community-owned cooperative businesses.
Seed Commons is a national cooperative network of locally-rooted, non-extractive loan funds with assets of over $15M that brings the power of big finance under community control. Co-op Cincy joined the Seed Commons in 2017 and has since leveraged over $215,000 in local and national financing for four local cooperative businesses--impacting more than 30 workers with average wages more than twice the minimum wage. Partnering on the Business Legacy Fund is expected to further strengthen and stabilize Southwest Ohio.
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