With the oldest workforce in the nation, Maine is on the leading edge of the baby boomer retirement wave dubbed the “Silver Tsunami.” This presents many challenges for our state, the most pressing of which may come from the looming retirement of thousands of small business owners and the jobs that could be lost if those businesses are not sustained.
Nationally, the largest single source of avoidable job loss is from business closings because of owner retirement. And the retirement rate among business owners is projected to double over the next 20 years.
In Maine, about 32,000 small businesses employ more than half of Maine’s workers, at least 75 percent of those owners are baby boomers, and research shows few of them have concrete succession plans for their businesses. There aren’t a lot of potential buyers out there, particularly in rural Maine.
Well, there may be a silver bullet for addressing this silver tsunami — a chance to permanently bend the arc of opportunity in this state toward a sustainable, broadly shared prosperity.
We should encourage business owners considering retirement to sell to their employees — whether as worker cooperatives or Employee Stock Ownership Plans — and public policy should support them in the effort. Research shows that employee-owned firms are more productive, profitable and resilient than conventional firms. Nationally, they’ve generated more than $1 trillion in additional wealth for 13 million workers.
This strategy is a substantial win for everyone. For business owners, selling to employees can yield a better sale price, reduce their tax liability from the sale and preserve their legacy. For employees, they have the opportunity to become cooperative entrepreneurs and build wealth through ownership. For the community, the jobs, profits and ownership stay locally rooted.
The Cooperative Development Institute started its Business Ownership Solutions program to help small business owners and their employees work through the design, execution, financing and education needed for a successful conversion to employee ownership. For example, when the owner of three retail businesses on Deer Isle decided it was time to retire, the Cooperative Development Institute and a group of advisors helped him and more than 60 employees convert the businesses into the Island Employee Cooperative. This was the largest and most complex conversion ever done in the U.S., and the Island Employee Cooperative has become the largest worker cooperative in Maine and the second largest in New England.
Champions have come from across the political spectrum — from Ronald Reagan to Bernie Sanders — because employee ownership works. It strengthens economic and community development by enabling more people to build wealth through the ownership of private businesses.
Many states are rising to the challenge. For example, the treasurers of Indiana and Ohio invested millions of their states’ deposits to leverage private sector investment in financing employee buyouts. Iowa created a fund to pay 50 percent of the cost of feasibility studies for business owners considering conversion, and it created a major tax incentive for selling to employees. New Jersey went even further and eliminated all capital gains tax on the sale of a small business to employees. Numerous states across the country have created Employee Ownership Centers, as a complement to public and private business development programs, to meet the unique challenges and opportunities of employee ownership conversion.
In Maine, we have an opportunity to take a big step in addressing this critical economic and community development challenge. LD 1300, An Act to Create and Sustain Jobs Through Cooperative and Employee Owned Business Development, adopts some of the best strategies that have been tested in other states. It would improve access to financing, education and technical assistance; provide a tax incentive to business owners who sell to employees; and create a Maine Employee Ownership Center.
A bipartisan majority of both the Maine House and Senate approved the legislation earlier this year. Unfortunately, it was then held up in the end-of-session political fighting that brought the legislative process to a near standstill. It will be taken up again by the Appropriations Committee at the beginning of the next legislative session in January.
We have a once-in-a-generation opportunity to preserve local ownership of thousands of Maine businesses, give the workers at those businesses a chance to build wealth through ownership, and sustain the economic vitality of communities throughout the state. All of us need to contact our state legislators, particularly if they serve on the Appropriations Committee, and urge them to finish what they started with LD 1300.
Rob Brown of Northport is a cooperative development specialist and director of Business Ownership Solutions at the Cooperative Development Institute.