In the small-business world, it happens a lot: A long-time family enterprise has no one else in the family who wants to keep it going, a buyer can’t be found, and the business simply closes. A recent example was Stone’s Restaurant, an anchor of Cheviot’s business district for 57 years, which closed in January. Chris and Stephanie Stone were ready to retire and had no one willing to continue their West Side tradition of serving home-cooked meals. The closing left a big vacancy in the heart of the town’s business district.
A group called Co-op Cincy
is working to keep family-owned businesses alive by helping their workers buy them.
Co-op Cincy has started the Business Legacy Fund, a program to help retiring business owners sell their companies to their workers, saving jobs and maintaining legacies.
“It’s important to find a way for these business owners, who may not have a way to transition their businesses, either to their children or to an outside buyer, and who may not be aware of other options, to sell their businesses to their employees,” says Michael Palmieri of the Ohio Employee Ownership Center.
The Center and Co-op Cincy are part of a statewide network, the Ohio Worker Ownership Network, that provides training and assistance to encourage transitions of small businesses to employee ownership.
The Center, housed at Kent State University, just issued a report that said Ohio is facing a wave of business-owner retirements. In the state, baby boomers own 54% of businesses, or 94,000 firms, which employ 2.6 million people, it says. More than half of these business owners plan to retire in the next decade, but most of them — 80% —do not have a formal succession plan. What’s more, when put on the market, only 1 in 5 businesses actually sell, the report says.
To help keep these small businesses going, Co-op Cincy created the Business Legacy Fund to help entrepreneurs acquire companies and transition them to worker-ownership.
In its inaugural cohort, Co-op Cincy educated six businesses about worker-ownership. One is Shine Nurture Center a child-care center founded in 2015 that employs 12 people. Its owner wants to go back to school to pursue a doctoral degree and is working with Co-op Cincy to transition the business to the workers.
“That’s the best way to run a business like this,” says owner Katie McGoron. She says worker ownership promotes the hiring of highly qualified staff, improves their motivation, and reduces employee turnover.
A loan will allow McGoron to sell the business to her employees through a leveraged buyout, with McGoron receiving two-thirds of the estimated value up front. She will receive the remaining amount over a five- to seven-year period.
Co-op Cincy is currently accepting applications
from companies for its 2022 program to transition businesses to worker ownership.