Business Retention and Succession: A Co-operative Solution

January 12, 2016

Three-quarters of small business owners do not have a succession plan for their business.  And, one-third of all business closures are due to succession failures and the lack of preparation. In the next ten years, half of Canadian small business owners will want to sell their businesses to retire. That’s over 500,000 businesses. In other words, there is likely going to be excess supply of small businesses for sale with too few buyers.

While nine out of ten family business owners believe that their family will succeed them, only 30% of family businesses survive into the second generation and only 12% are still viable by the third generation. And, hoping to find an unknown third party to purchase the business is risky.

That leaves two co-operative alternatives that could provide a solution:

  1. Selling to employees - The workers and management convert the enterprise in which they currently work into a Worker Co-operative.
  2. Selling to people in the community who want to keep the products and services available. This would be a Consumer Co-operative where the customers of an enterprise become the members and owners that purchases and operates the business.

The Ontario Co-operative Association (On Co-op) has been working with the Canadian Worker Co-operative Federation (CWCF) the national organization of employee-owned co-operatives in Canada to develop a program to support the conversion of SMEs with retiring owners to employee-owned co-operatives. They have done research, co-created guides and adapted best practices from organizations in other countries dedicated to this business succession solution.

More detailed information is available online at http://coopzone.coop/en/BusinessSuccessions.

Peter Cameron
Co-op Development Manager
On Co-op