“If you’re a boomer business owner planning for succession, you can’t afford to overlook the employee ownership option,” writes Lori Shepherd in Entrepreneur.
At NPQ, we have written about the growing prominence of employee ownership, but mostly from the perspective of the value of preserving businesses and jobs in the community. Still, these community benefits will only be realized if business owners agree to sell to their employees. So, what would drive a business owner to do so?
While the ability to defer capital gains tax is a factor, it turns out there are also powerful market incentives. A wave of retirements (2.4 million, Shepherd estimates) has long been expected in the decade or so to come, and as Shepherd points out, “In a crowded marketplace, transferring full ownership to the workers may represent [retiring owners’] best chance to sell their businesses at fair market value.”
This phenomenon isn’t unique to the US, either. A 2011 study in Europe found that, “450,000 enterprises, providing 2 million jobs, are being transferred in the EU every year. The EU may lose approximately 150,000 of these enterprises each year, representing 600,000 jobs, because their owners retire, set up a new business or seek other opportunities, but cannot find anybody to take over their firms.”
Read more at Nonprofit Quarterly!