According to recent research done by Project Equity, a nonprofit group, there are about 2.34 million businesses owned by this generation that generates more than $5 billion in sales and employs 24.7 million people–about one-sixth of all U.S. workers. As the current owners look to exit, their options are few: sell (six out of 10 business owners plan to do this in the next decade), hand the company to their kids, or close it down. Unfortunately, many of them may be forced to go with the third option and close up shop. Why?
According to Project Equity, many small business owners do not have succession plans–and because of this they’re putting their employees at risk. As a small business owner I empathize–we tend not to think ahead. This leaves us with fewer choices when it comes time to retire. Without succession planning, many of these businesses “will just quietly close down and go away,” says Project Equity’s co-founder Alison Lingane.
Lingane says a third of business owners in this generation who want to sell are having a “hard time finding a buyer” and many are being bought out by out-of-area buyers that are consolidating ownership and wealth. The result: the jobs of all of their employees are at risk, regardless of their industry.
The organization is working to raise awareness of the issue. It is urging local governments to measure the impact on their tax base by using business license data to track how many businesses are more than 15, 20 or 25 years old so that local business and political leaders can get involved.
The most impactful solution is encouraging business owners to think ahead and consider transferring ownership of their companies to their employees. “Since today most family-owned businesses don’t have somebody in the next generation who wants to take over, employee ownership is one of the best ways to keep thriving businesses locally rooted into the next generation,” said Mark Quinn, District Director, U.S. Small Business Administration.