Data shows us just how deep this problem runs. Over half of all small business owners in the Ocean State are at or approaching retirement age. Nationwide, the Small Business Association found that retirement is the fastest-growing reason for small business closures. When you consider that 99 percent of all businesses in the state are small businesses, it’s clear that this trend will devastate not only on our economy, but our shared identity and culture as well.
We can stem the tide of closures by helping more businesses explore employee ownership, an arrangement whereby an existing small business owner agrees to sell their business to their employees.
Harvard Business Review found that employee-owned companies last longer than their counterparts. But it’s the impact on wealth creation where we see employee ownership shine the brightest.
The National Center for Employee Ownership found that Employee Stock Ownership Plans are “associated with 92% higher median household net wealth, 33% higher median income from wages, and 53% longer median job tenure.” Employee ownership presents an exciting opportunity to extend the financial benefits of business ownership to communities that have never had the chance to do so before.
We know that employee-owned companies work because they thrive on every Main Street in the state. From smaller operations like White Electric Coffee in Providence and Stanley Tree Service in Smithfield to companies like the Newport Restaurant Group, one of the largest worker-owned companies in the United States, it’s clear that Rhode Island is primed to lead in this new collaborative economy.
Despite the many businesses in our state that succeed under this business model, Rhode Island lags behind our neighbors in helping business owners sell their business to their employees. Twenty-three states across the country, including Massachusetts and Connecticut, have already created Centers for Employee Ownership to help businesses to make that transition instead of closing.
These centers provide business owners with the support they need to sell their business for a price that reflects the decades of hard work they have put into it. Centers for Employee Ownership also help exiting entrepreneurs and their employees lay the foundation for a successful worker-owned enterprise by developing the necessary legal and financial frameworks.
That is why I assembled the Business Enterprise Succession Taskforce, a dedicated group of small business owners, chambers of commerce, government agencies, nonprofits, and technical assistance providers to help advocate for the funding and policies needed to bring a Center for Employee Ownership, and the wealth generating possibilities that come with it, to the Ocean State.
We published a survey to hear directly from business owners about their retirement plans (or lack thereof), conducted tours of different small business communities, and even developed a pilot program where we walk legacy business owners through the process of selling their business to their employees. We’re moving in the right direction, and opening a Center for Employee Ownership must be our next step.
I care about employee ownership because small businesses are the key to our cultural identity as Rhode Islanders. One of the first things I learned when I immigrated to Rhode Island is that when we give directions, we don’t measure in feet or miles but in businesses. We tell you to take a turn at The Original Italian Bakery and that if you’ve hit Ricotti’s, you’ve gone too far — or, more often, to turn where the Almacs or the Ann & Hope used to be.
But it’s time to chart a new path: one where the businesses that define Rhode Island stay open and remain in the hands of the communities who built them. For the sake of our small business economy, for the sake of our state’s heritage and identity, and for the sake of our wayfinding, we need a Center for Employee Ownership.
Sabina Matos is the lieutenant governor of Rhode Island. She is running for reelection.