Six Ways to Make Workers Business Owners-and Why It's a Good Idea - Non Profit News | Nonprofit Quarterly

"Across the United States, communities face a looming crisis: As millions of owners of small and midsized businesses prepare to retire or step back, the businesses that anchor local economies-and the jobs and wealth they create-are at risk of disappearing. These businesses are often sold to outside buyers, gobbled up by private equity, or simply shut down, leaving communities without vital services and workers without stable jobs. As Nancy Forster-Holt, a University of Rhode Island business professor, observed, people who are "61 to 79 years old...own about 2.3 million businesses...and employ almost 25 million people.""

"Worker purchases [of businesses]...are not common enough. Such sales or "conversions" are far from rare. Today, over 6,500 US businesses are owned in whole or part by employee stock ownership plans (ESOPs)-employee shares in ESOPs as of 2022 were valued at over $1.8 trillion. And there are other worker ownership options, such as worker cooperatives and employee ownership trusts. Ownership matters."

"A 2019 report from Rutgers University found that "the median wealth of Latinx ESOP employees...is nearly 12 times the wealth of the national median for Latinx households. Black ESOP employees have approximately three times the wealth of Black households nationally." Sadly, while worker purchases are not rare, they are not common enough. Many opportunities are missed. And many gaps in field knowledge remain. For example, the article by Forster-Holt on business succession cited above does not even suggest selling to employees as a possible option. This is not an uncommon omission."

Millions of small and midsized business owners are approaching retirement, placing anchor businesses, jobs, and local wealth at risk of being sold to outside buyers, absorbed by private equity, or shuttered. People aged 61 to 79 own about 2.3 million businesses and employ almost 25 million workers. Employee purchases and conversions to worker ownership offer a proactive alternative. Over 6,500 U.S. businesses use ESOPs, with employee ESOP shares valued at over $1.8 trillion in 2022, alongside worker cooperatives and employee ownership trusts. ESOPs can substantially increase household wealth for Latinx and Black employees. Worker buyouts remain underused and knowledge gaps persist. Workers do not have to have all of the cash on hand to buy their business.

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