ARLINGTON, Va., Sept. 12, 2018 /PRNewswire/ -- According to a new report, succession planning for small businesses when owners near retirement is critical and conversion of these businesses to an employee-owned model is a solution for building wealth, retaining jobs and expanding economic opportunities, especially for women and minority employees.
A newly released report from Capital Impact Partners and ICA Group, with support from Citi Community Development, identifies key sectors, regions and strategies for converting business ownership to employees using a cooperative model helps transform the lives of economically vulnerable communities, especially those in urban areas. "Co-op Conversions at Scale: A Market Assessment for Expanding Worker Co-op Conversions in Key Regions & Sectors" illustrates how conversions can anchor successful businesses, build assets for employees, retain quality jobs, and drive local prosperity.
The study finds that childcare, home care, food manufacturing, grocery, and residential care businesses provide higher wage, sustainable jobs and are primary industries to focus on for employee conversions. Nearly half (42 percent) target companies are valued over $800,000, demonstrating market opportunity for lenders who are eager to invest and achieve tangible impact.
In a cooperative conversion, owners sell their businesses to their employees. The employee-owners share an economic stake in and control of the venture and are thus guided by a concern for the common welfare of that business.
"As a mission driven organization focused on social and economic justice issues, the market for converting small businesses into employee-owned enterprises is incredibly promising," said Ellis Carr, president and CEO of Capital Impact Partners. "This has the potential to be a transformative model for communities of color, and I am thrilled this report lays out the pathways to take it to scale."
To date, there has been very little quantitative analysis examining the market opportunity. This report is meant to be the first step in bridging this gap. It examines the market potential for converting firms with 20-100 employees by looking at the actual transfers and closings of businesses that are high-potential targets for successful transactions.
"Industries like food manufacturing, child care and home care are cornerstone services for many vibrant neighborhoods," said Natalie Abatemarco, Managing Director of Citi Community Development and Inclusive Finance. "These findings reveal industries where employee ownership can provide an economically viable alternative for retiring entrepreneurs, enabling businesses to stay open and build wealth for employees and the neighborhoods where they operate."
Using a proprietary longitudinal database, the ICA Group examined the strongest market potential for conversions in five industry sectors across five geographical regions, namely New England, New York Metropolitan Area, Mid-Atlantic Cities (Philadelphia, Baltimore, Washington, D.C.), Chicago Metropolitan Area, Los Angeles and the Bay Area. The five industries identified include: Child day care services, home health care services, nursing care facilities, grocery stores, and food manufacturing. The key findings of the survey ? which can be read in full online ? are below.
KEY FINDINGS
The ratio of small business closures to business sales among independent firms operating for more than 25 years was 9 to 1, creating huge gaps in those communities they serve. When you consider that these firms employ 17 percent of all workers in the United States, the impact of business closure is profound for communities and their local economies.
Industry Opportunities:
Conversions:
Business closings:
Transaction opportunity:
About Capital Impact Partners:
Through capital and commitment, Capital Impact Partners helps people build communities of opportunity that break barriers to success. We champion social and economic justice for underserved communities to foster good health, economic opportunity, and interconnectedness. Through mission-driven lending, incubating social impact programs, impact investing, and policy reform we partner with local communities to create equitable access to health care and education, healthy foods, affordable housing, and dignified aging for those most in need. We have disbursed more than $2.5 billion to revitalize communities over the past 35 years. Our leadership in delivering financial and social impact has resulted in Capital Impact earning a "AA-" rating from S&P Global and being recognized by Aeris since 2005 for our performance. Headquartered in Arlington, VA, Capital Impact Partners operates nationally, with local offices in Detroit, MI, and Oakland, CA. Learn more at www.capitalimpact.org.
About Citi Community Development
Citi Community Development leads Citi's commitment to financial inclusion and economic empowerment for underserved individuals, families and communities across the U.S. Through innovative collaborations with municipalities, community groups and leading nonprofit organizations, we harness the institution's expertise, products and services to help expand opportunity for all.
Additional information may be found at http://citicommunitydevelopment.com | Twitter: @Citi | YouTube: www.youtube.com/citi | Blog: http://blog.citi.com | Facebook: www.facebook.com/citi | LinkedIn: www.linkedin.com/company/citi
SOURCE Capital Impact Partners
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