Building the pipeline: How to keep small businesses open through minority ownership

Last September, Co-op Cincy, local co-op incubator, and the Seed Commons national financial cooperative released their $3 million Business Legacy Fund in response to the wave of retiring business owners and the new threat caused by the COVID-19 pandemic.

In the past, explains Kristen Barker, executive director of Co-op Cincy, 80% of private businesses have closed during times of transition. This often happens when owners don’t have kids who want to take over, and don’t have an additional succession plan in place.

In Hamilton county, these closures could cost nearly 70,000 jobs, $18.5 billion in sales, and $3.8 billion in payroll.

The pandemic increased the risk when only 12% of minority business owners who applied for forgivable, low-interest loans from PPP received them.

Last Wednesday, they launched the Business Legacy Fund Acquisition Program.

Through this, Co-op Cincy and their other partners are using the $3 million in funding to help people transition their companies to their employees through Search Fund program designed to broaden business ownership within historically disenfranchised communities.

By being proactive and acquiring businesses with workers from these communities and transitioning them to worker ownership, Co-op Cincy hopes small businesses can be saved and passed on to employees with the help of training and guidance given at trainings and workshops.

“It can be an incredible opportunity to broaden wealth,” says Baker. “This is an awesome secret we want everyone to know. You can be as big as you want or as small as you want, she continues, “so this could be a real answer for someone hadn’t considered their employee ownership before.”

Currently, they are accepting applicants and hoping to find for 3–5 entrepreneurs for the program. The deadline to apply is July 1 and the program starts on August 15. Participants will receive a cooperative business management certificate from Xavier’s Leadership Center, one year of dedicated search and support, financing to acquire the business, and experience running it as a cooperative CEO.

The goals, according to Baker, are to help build skills, demystify the financials, and help people tap into collective wisdom to problem solve any challenges that emerge.

“We want to have a cohort every year,” Baker says. “We want to have worker ownership every year with the goal of creating a community for all, especially for people have been historically marginalized.”