A bustling Main Street is a beautiful sight for rural business owners. Customers meandering into shops, tourists frequenting restaurants and locals chatting over coffee brings a town to life, while also bolstering its financial health. Without a doubt, local businesses are a vital component for any small community. Now, as economic uncertainty looms and typical business owners are aging, the need to sustain rural businesses is becoming more apparent. Denver-based nonprofit Rocky Mountain Employee Ownership Center (RMEOC) is ready to take action.
Founded in 2012, RMEOC builds sustainable and equitable economies by providing dynamic services to help rural business owners convert to an employee-ownership model. According to RMEOC, less than 20% of businesses put on the market are sold and only 15% are passed onto family members. Furthermore, the U.S. Census Bureau’s 2022 Annual Business Survey, reported that more than half of U.S. business owners are 55 or older, including 22.8% who are over 65.
Between lack of sales and retiring owners, businesses are faced with questionable futures; however, an employee-ownership model may help reduce closures since workers are already invested in the company and owners can easily negotiate with workers in a fair and transparent process.
“This model prevents the company from shutting down, which means a lot of jobs lost and also services that are no longer accessible,” said Marion Champoux-Pellegrin, RMEOC’s rural employee ownership director. “For worker-owners, it can provide a higher income which often increases their ability to afford to keep living in their location. A lot of mountain towns are so expensive, but we feel a lot of people stay in their position longer, they feel more challenged, engaged and connected to the work with a worker-owned model.”
Owners, however, are initially deterred because they lack support and experience difficult negotiations, extensive paperwork and an average cost of $30,000. To combat these challenges, the nonprofit is providing critical state-funded scholarships to help offset the cost and burden of implementing an employee-ownership model.
“For any kind of small business, especially rural businesses, every dollar counts,” said Champoux-Pellegrin. “We’re asking people to think about a new way to do things. It’s work, and there’s an indirect cost associated with this, but we want to alleviate that stress. Selling your business is not easy, but the alternative is that the business shuts down, which would be a shame for everyone involved.”
The funding itself comes from Colorado’s portion of the American Rescue Plan Act and is administered by the state Office of Economic Development and International Trade (OEDIT). Qualified owners receive a 50-100% scholarship to access RMEOC’s technical assistance, a step-by-step program that ensures a smooth transition. RMEOC’s technical assistance is already available on a sliding scale based on a business’s revenue, but coupled with the scholarship and available tax credits, businesses can receive high quality assistance for little to no cost. Champoux-Pellegrin estimates that 12-20 rural businesses can receive the scholarship.
To be eligible, the business must be located in a rural county, can certify COVID impact, have three or more employees and be willing to sell 20% or more of their business.
“Owners don’t have to apply directly; they can just call or meet with us to get free consultations and we’ll tell them more about it and get them on the path to employee-ownership,” said Champoux-Pellegrin. “We’ll talk about costs, what kind of discount percentage they might receive and the supplementary tax credits.”
Champoux-Pellegrin emphasized that while aging owners are strongly encouraged to reach out, this scholarship is for all business owners because it is never too early to have a plan in place.
“We want everyone to know about this option so that when the time is good for them they know who to reach out to and what it is going to look like,” she elaborated. “We all benefit from the hard work of farmers, grocery store clerks, auto body technicians, baristas and everyone who contributes to the comfort of our daily life. I think they deserve to build wealth and comfort, too, and that’s what we’re working toward.”
Visit www.rmeoc.org/funding/funding-for-rural-businesses to learn more about Rocky Mountain Employee Ownership Center and the technical assistance scholarship. Ready to begin? Call 303-351-2003 for your free consultation.