NYC Public Advocate Letitia James estimates that, across New York state, 3,700 businesses close each year as a result of the owner’s retirement, resulting in 13,260 lost jobs a year.
In a new policy brief last week, covered by Crain’s New York, James advocates for what she calls a “proven strategy to retain jobs and build assets for workers”: transitioning businesses to employee ownership.
“New York City should encourage business owners nearing retirement to consider transitioning to employee ownership, as part of a broader effort to assist with transition planning,” the brief says. “The city should also create a program that would provide financing for business owners that wish to transition to employee ownership.” Across the U.S., 2.3 million businesses helmed by baby boomers means as many as 1 in 6 jobs are at risk of being lost due to owner retirement, according to a recent study from Project Equity.
“What we know about small businesses is that very few (less than 15 percent) will be passed on to family members, others will be sold to a local buyer, still others to someone outside the local community,” said Alison Lingane, co-founder of Project Equity, in a statement. “But many of them will just quietly close down and go away. Nationally, one-third of business owners over age 50 reports having a hard time finding a buyer.”
Back in NYC, James isn’t the only public official that sees the wave of retiring small business owners as a challenge and opportunity for policymakers. Last fall, NYC Comptroller Scott Stringer announced an initiative to explore the creation of a city-sponsored retirement plan for small businesses. Nearly 90 percent of employees at businesses with 10 or fewer workers has an employer-based retirement plan, Stringer’s office estimates.