Retiring Business Owners Target for Employee Ownership Conversions
by Karen Kahn
The local economy of Eastern Kentucky is struggling. Ongoing challenges in the region have been heightened by the collapse of the coal industry, leaving high unemployment rates and declining public infrastructure. And now, as baby boomer entrepreneurs look to retirement, thousands of small businesses that serve rural communities and offer local employment are at risk of closing.
These challenges have not deterred the Mountain Association for Community Development (MACED), an economic development organization focused on building a more diverse, equitable and sustainable economy across the region. In fact, MACED sees an opportunity: transferring ownership of local businesses to employees. This strategy could not only save jobs but help to build a more equitable future.
MACED has recently joined with the Kentucky Center for Agricultural and Rural Development (KCARD), a United States Department of Agriculture cooperative developer, to raise awareness of worker-owned business models. On March 27, the two organizations held the first of two planned educational forums, in which they brought in Oakland-based Project Equity to introduce participants to the ways in which employee ownership can be structured and to best practices in transitioning conventional businesses to employee ownership.
Leslie Ferguson-Oles, research and strategic project coordinator for MACED, says that “the silver tsunami is a real threat to small Appalachian communities. Businesses in rural areas often serve as important community anchors.” MACED doesn’t want to see these businesses close their doors.
The workshops are designed to educate MACED staff as well as other area business advisors — those who provide financing, legal services, and technical assistance — so that employee ownership becomes a part of their tool box.
The workshops are designed to educate MACED staff as well as other area business advisors — those who provide financing, legal services, and technical assistance — so that employee ownership becomes a part of their tool box. Community Development Financial Institutions (CDFIs), regional and county economic developers, and small business owners attended the first training. Presentations from H&R Agri-Power, a Western Kentucky employee-owned farm implement dealer, and Opportunity Threads, a North Carolina employee-owned textile business, demonstrated that employee ownership has real potential to spur economic growth.
H&R Agri-Power became employee owned when Wayne Hunt, in his seventies, was ready to sell his business. His family convinced him to transfer ownership to the employees through an Employee Stock Ownership Plan (ESOP). Now 100 percent employee owned, H&R has been purchasing other farm dealerships, as owners seek to retire. The company is thriving as it expands beyond Kentucky to other rural communities.
Opportunity Threads is a profitable textile cooperative employing more than 20 workers, mostly Mayan immigrants. Initiated by Molly Hemstreet, who is originally from the region, Opportunity Threads has become a $1.2 million operation and an example of the kind of craft production that MACED thinks can help to power the Eastern Kentucky economy. Opportunity Threads is a cut-and-sew operation, making high-end textiles for entrepreneurs designing unique products.
One of the goals for the MACED workshops is to raise awareness across the region about the benefits of employee ownership. “Eastern Kentucky has a strong history of electric, telephone and agricultural cooperatives, but people are sometimes less familiar with worker cooperatives. We want to make sure this option is part of the conversation.”
Karen Kahn provides communications consulting and editorial support for Fifty by Fifty.
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