The retirement of the baby-boom generation will have major economic effects in the United States, Canada and many other nations. Among these effects will be high turnover rates in ownership--or closure--of many small businesses.
When the present owners wish to retire, the most readily available buyers are often local or regional competitors. Yet, many businesses acquired by competitors will be closed once they change hands. A new owner may buy a business simply to prevent a competitor from operating it. This closure outcome can often be avoided with succession planning that includes employees or others potential owners. The challenge of sustaining small, mostly family-owned businesses is confronting many countries.
Canadian cooperative organizations hosted a conference on business succession and employee ownership in Quebec City last October. (see conference highlights at: www.cooperation2011.coop). The conference proved to be an extraordinary event, both in its international scope and in the expertise that speakers and audience brought to the discussion of issues surrounding the ways to transition business ownership to employees.
Quebec City was an appropriate location for such a conference. The province of Quebec has an exemplary track record for cooperative development, as noted in the March/April 2001 issue of Rural Cooperatives. Quebec is home to more than 2,700 cooperatives and has pioneered the development of the multi-stakeholder co-op model. Desjardins, a credit union, has 5.8 million members and is a leading financier of cooperative development projects in the province. Canada has about 615 worker cooperatives, of which 394 are in Quebec.
Canadian research findings
Quebec's Ministry of Economic Development, Innovation and Exporting has done a survey on ownership succession of small businesses in the province. It is projected that about 55,000 Quebec business owners will retire from 2010 to 2018, 50 percent of whom have an inadequate or non-existent plan for the succession of their businesses. The age of employees is an important factor in successful business transfers, researchers have found. Successful transfers frequently have a core group of employees between the ages of 40 and 55. When the bulk of employees are over 55, there is an insufficient time horizon to finance ownership transfers.
Transfer of ownership when a large percentage of employees are in the 25-35 age range can also be difficult, due to the lack of commitment and limited work experience often found in that age group. However, people in their 20s are very active in start-ups of worker cooperatives, especially in businesses that appeal to a younger demographic group, such as bicycle shops.
The Canadian Worker Co-operative Federation, a co-host of the conference, is actively involved in the development of cooperatives and is also focusing on saving businesses through succession planning (for more information on this federation, visit: www.canadianworker.coop). Conference speakers cited a study in Canada that reports an estimated 200,000 small businesses (not self-employed entities) will be for sale by 2020. Several Canadian government and trade association officials voiced their concern over the impending decline of many rural communities from closures of small businesses.
Farms and ranches have a similar process of succession planning, although in contrast to small businesses, they more often stay in production either with new owners or in rental contracts. Nevertheless, retirements of both business owners and farmers are depopulating many rural communities.
The negative impacts on local economies from business and population decline are a problem that both Canada and the United States must confront.
Speakers from the United States, Italy, …