Submitted by: Whatcom Community Foundation
Project Equity, a nationwide nonprofit dedicated to advancing community economic resiliency, released a report today examining the small business landscape in Washington, and the potential transfer or closure of many of these businesses as baby boomer owners retire over the next 15 years. This data, gathered in partnership with and commissioned by the Whatcom Community Foundation, shows the vulnerability of Washington communities, including Whatcom County, in terms of job and revenue loss as aging business owners, many of whom do not have a succession plan, sell or close their businesses.
The report also highlights the potential for communities to retain business, jobs and the associated revenue by encouraging and facilitating transitions to an employee ownership model. Owners retire well, while preserving the legacy of their years of hard work. Employees and communities enjoy the many benefits that come with employee owned enterprises.
Six of 10 will sell in next decade
This data is part of Project Equity’s national response to the upcoming “Silver Tsunami,” a phrase used to describe the aging of this iconic generation. Report data reveals that almost half of privately- held businesses in Washington State are owned by baby boomers, and 6 out of 10 business owners plan to sell their business in the next decade.
“While some of these businesses — around 15% — get passed on to family, and others may sell to a local buyer, many are bought by larger or out-of-state buyers, or shutter their operations entirely,” explains Project Equity co-founder Alison Lingane.
Nationwide, one-third of business owners over 50 say they have had trouble finding a buyer for their business, and only 20% of companies listed by a leading business broker ever sell. In Whatcom County, researchers counted more than 2,000 boomer-owned businesses that may undergo an ownership transition in the next decade. These businesses employ 16,810 workers, generating $589.5 million in payroll and $3.28 billion in sales, showing the profound impact on the Whatcom County economy should even a fraction close. Statewide, the impact is amplified, with more than 570,000 employees working for baby boomer-owned businesses that are generating $112.56 billion in sales and more than $20 billion in payroll.
Employee ownership model offers several benefits
The data reveal not only the impact that the upcoming ownership transition could have, but also the potential to retain businesses in the community through employee ownership strategies.
“Employee-owned companies increase job quality and have demonstrable positive impact on job creation, and on business retention, says Lingane. “With lower employee turnover, job stability is also dramatically higher.” Research also shows that workers in employee-owned businesses have better pay and benefits, and have higher retirements savings.
Small businesses make up more than 99% of the firms in Washington State, and those that are locally-owned circulate three times more money back into the local economy than large national chains. Providing local business owners with strategies and support to convert to employee ownership is one strategy to keep these local businesses thriving and remaining in the community into the future.
“You can’t have a healthy community without a diverse and resilient local economy,” said Mauri Ingram, Whatcom Community Foundation President and CEO. “It’s easier to retain businesses than to start or attract new ones. The Community Foundation is working to ensure that owners and employees who are interested in employee ownership have easy access to the resources they need all along the way.”
In addition to the Whatcom Community Foundation, the Community Foundation of Southwest Washington, Yakima Valley Community Foundation and the Community Foundation of South Puget Sound contributed funding to the Project Equity research.
Research results are available at: https://www.project-equity.org/communities/small-business- closure-crisis/washington-state/
About Whatcom Community Foundation
Whatcom Community Foundation is focused on amplifying the force of philanthropy by connecting people, ideas and resources so that communities across Whatcom County, Washington flourish. To accomplish their mission, they foster partnerships, put dollars to work through grant-making and impact investing, strengthen nonprofits, help donors make a difference and advocate for equity. Visit www.whatcomcf.org.
About Project Equity
Project Equity is an Oakland-based nonprofit that is a national leader in supporting businesses to transition to employee ownership, and has partnered with communities as diverse as Lancaster, Pennsylvania, Detroit, Michigan, rural Western North Carolina and the Twin Cities in Minnesota. Visit www.project-equity.org.