Cincinnati and Hamilton County officials Monday launched a year-long initiative with two missions: preserving local businesses whose owners are eyeing retirement and promoting worker ownership of local companies.
The city and county will work with nonprofit Co-op Cincy, national co-op federation Democracy at Work and officials in Raleigh and Durham, North Carolina on the effort, called Business Legacy Cincy.
Mayor Aftab Pureval said those cities and others have made strides in retaining small businesses and boosting employee ownership. He said that model could be a vital answer to a pressing problem, noting that nationally, 60% of small businesses are owned by people 55 or older.
"Many small businesses face a particular challenge," he said. "When the owner begins to plan for retirement, it's not always clear or easy to decide what comes next."
Local officials point to statistics from Democracy at Work suggesting only about 30% of small businesses are transferred to family members when the owner retires. And only about 20% get sold to other buyers. Many others simply close down.
Software entrepreneur Tim Rettig says it doesn't have to be that way. Rettig grew up watching his father run his own software business, which eventually grew to supply programs to about 400 municipalities nationwide. When his father retired, he transitioned ownership to his employees. Rettig started his own company in college and grew it over the next three decades before going the same route.
"In 2019, the company became 30% employee-owned, and last year, I transitioned it to 100% employee-owned," Rettig said.
The solution isn't always an obvious one for small business owners, with questions about the logistics of the transition and leadership structure afterward. That's where the city, county and Co-op Cincy want to provide guidance, officials say.
There's also the question of how employees can collectively afford to buy the company from the owner.
Co-op Cincy Vice President Flequer Vera says financing often exists to allow employees to borrow enough to purchase a profitable business. He says the upsides can be huge for both company owners and employees.
Vera is also CEO of Sustainergy, a worker-owned company which installs solar panels and advanced energy efficient insulation in homes and businesses. Vera says the company paid $160,000 in dividends, beyond normal wages and benefits, to its 20 employees last year.
"They can use those dividends to buy a house, pay for a car," he said. "It can be transformational."
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