Massachusetts Faces Business Ownership Crisis Amid Baby Boomer Retirements

News Summary

As Baby Boomers prepare to retire, Massachusetts confronts a potential crisis in small business ownership. With many business owners nearing retirement, the Coalition for Worker Ownership and Power has proposed legislation to encourage employee ownership and prevent the closure of small businesses. Key measures include granting employees the first right of refusal to buy businesses, aiding employee buyouts, and providing financial incentives for sellers. This initiative aims to preserve jobs and foster economic stability within local communities.

Boston, Massachusetts – The Coalition for Worker Ownership and Power has alerted state lawmakers about an impending crisis involving the “silver tsunami” of Baby Boomer business owners preparing to sell their enterprises within the next 15 to 20 years. With approximately three million small businesses nationwide led by founders older than 55 years, this trend poses a significant risk, particularly in Massachusetts, where around 70,000 small businesses are affected. A lack of buyers could result in many of these businesses closing down, leading to job losses and a decline in local economies.

In response to these challenges, the coalition has put forth a legislative proposal (H 503 / S 305) to the Joint Committee on Economic Development, designed to encourage business transitions to employee ownership. This initiative emphasizes the importance of preserving jobs and maintaining community integrity by facilitating a shift towards employee-owned businesses.

The proposed legislation includes several key measures aimed at supporting this transition. One of the primary features is granting employees the right of first refusal when a business is put up for sale. This measure would ensure that workers have the opportunity to purchase the business before it is offered to external buyers. Additionally, the bill outlines the provision of technical assistance for employee buyouts, which would aid teams of employees in navigating the complexities of purchasing their workplace. Another significant component is the exemption from state capital gains tax for sales under $1 million, serving as a financial incentive for retiring business owners to sell to their employees.

Halsey Platt, owner of a construction company in Ayer, is an example of local entrepreneurs pioneering this shift. Platt is in the process of transforming his business into an employee cooperative, emphasizing the long-term benefits it can offer, such as generational wealth for employees involved in the cooperative structure.

Advocates argue that promoting employee-owned businesses is crucial for both job retention and local economic health. The situation represents a unique opportunity to revitalize communities while simultaneously passing the baton of ownership to those directly involved in the labor of the businesses. In 2022, the Massachusetts Center for Employee Ownership was established to support such ventures and operate with an annual funding of approximately $150,000.

In order to broaden its outreach and capabilities, the Coalition for Worker Ownership and Power is advocating for an increase in funding for the center, seeking $685,000 to bolster assistance for both new and existing worker cooperatives. This additional funding would help create a supportive environment for employee-owned businesses to thrive in the state.

The potential impact of worker-owned cooperatives is particularly noteworthy within Black communities, as highlighted by local leaders. Data suggests that 40% of respondent worker-owned cooperatives in Massachusetts have a majority of workers or owners of color, indicating an opportunity for wealth transfer and increased employment levels within these communities. This focus on inclusivity aligns closely with the state’s commitment to economic equity and the promotion of diverse ownership structures.

As Baby Boomers prepare for retirement, the landscape for small business ownership in Massachusetts is on the verge of significant change. The shift towards employee ownership not only presents a strategy for sustaining existing enterprises but also represents a proactive approach to mitigating job losses and fostering economic stability in the face of upcoming business transitions.

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