Last year I read an interesting report which highlighted the official United States unemployment rate dropped to 3.7%, representing a 49-year low. I also discovered that a recent Harris Poll had cited 80% of American workers report living paycheck-to-paycheck. And, in California, the data were just as troubling with U.S. Census Bureau indicating California having one of the highest official poverty rates in the nation at 19%, including nearly 13% of those who have jobs. And, when examining these opposing statistics closer, you find that our “full employment” economy is not a sign of prosperity, but rather, it is an economy trending towards creating low-paying, temporary jobs with no benefits or job security. However, in Long Beach, the city is at the forefront of turning this trend around for its communities, by building quality jobs from our most important resources: small businesses that transition into employee-owned businesses.
With 2,500 small businesses in Long Beach in operation for more than 20 years, which employ 1 in 3 Long Beach employees, you can imagine the hardships caused if these jobs disappeared. These business owners need a way out, and employee ownership could provide it. As a long-term solution, transitioning to employee ownership through an Employee Stock Ownership Plan (ESOP) or a cooperatives offers retiring entrepreneurs a safe and profitable way out of their dilemma. A leading business broker finds that only 20% of businesses listed for sale ever sell, and only 15% of companies will be passed on to a second generation. But, when business owners turn to employee ownership as a way to sell their company, they find they can be in the driver’s seat of the timing, sell at market rate and, in essence, find a buyer right under their nose.
Small business owners, more often than not, do not pass along their businesses to family members who would be able to sustain their business and the legacy it created, leaving them to close their businesses altogether or to sell them to out-of-area buyers. However, in Long Beach, this is no longer has to be true. Thankfully, Long Beach city officials are already on board with options that empower small business owners with business succession planning through an important partnership with the nonprofit I work for, Project Equity.
In addition, financing for employee ownership transactions of Long Beach businesses is also available. Last month, Project Equity and our lending partner, Shared Capital, announced Accelerate Employee Ownership, a collaborative initiative that supports small business owners who are close to retiring to retain their businesses and transition them into employee-owned companies Project Equity provides pre-to-post transactional support for Employee Stock Ownership Plans (ESOPs) and worker cooperative transitions, paired with tailored, flexible, and affordable financing through Shared Capital. It is one of the most comprehensive efforts in the country to boost employee ownership, creating a path to business ownership for individuals in low to middle-wage jobs.
In Long Beach, as well as throughout Southern California, small businesses are responsible for about half of all employment, and they circulate about three times as much money in local communities as firms owned by chains or out-of-town interests. Closing these companies serves the interests of no one, and non-local or corporate ownership means reduced benefits for communities and likely reduced salaries for workers. Employee ownership provides the power to deliver quality jobs with living wages to a broad range of workers, whose spending habits and entrepreneurial activities can help boost the entire economy, in Long Beach and within the city’s various communities.
For Long Beach business owners nearing retirement, this is the perfect time to jump on the employee ownership bandwagon. Employee ownership could mean a brighter and more sustainable future for the Long Beach, and Southern California economy, at a time when quality jobs are needed more than ever.