Exits & Opportunities

BO BURLINGHAM IS AN INC. MAGAZINE editor-at-large who has been writing about entrepreneurship  for three decades.  I know him; we have crossed paths several times.  But I know him much better from his writing, which includes a fine book called SMALL GIANTS:  Companies That Choose to Be Great Instead of Big (I have to admit here, sheepishly, and maybe arrogantly at the same time, that when I read that book I wished we had been included).

The November issue of INC., has a long piece by Bo called “What Am I, If Not My Business?” which is about the challenges entrepreneurs face in leaving their companies when they retire or sell.  He is in the midst of writing a book about the subject.

It’s an important and timely topic.  My fellow American baby boomers own several million businesses, and during the next two decades, most of these founders will exit. The businesses will either be shut down, sold (usually outside the community) or they will be passed on.  Passing on a business to its employees is an option that deserves to be more widely understood, for it offers powerful benefits to all parties.  It is in part a replacement for the family tradition of passing businesses down to children, which is largely a thing of the past.   Selling to employees is becoming a more and more important option.

As I read this article – and the wrenching troubles faced by (and sometimes caused by) owners getting out – I couldn’t but help be relieved and proud, at once, about my own situation.   Burlingham says that, “In the almost 28 years I have been observing the entrepreneurial landscape, I have noticed that leaving is a subject most business owners would rather not think about, and so they put off dealing with it as long as they can.”

I sold young, in 1987, at the age of 38.   I re-structured my sole proprietorship to a worker owned cooperative corporation.  It was a dramatic hinge point in the history of the company.  Ownership became available to all after five years of employment, enabling people to own and guide their workplace.  The responsibility, the power, and the profits all belong to the group of owners.  There are no outside investors and no non-employee owners. We decide what kind of business ours will be. The decisions are partly economic and partly philosophical.

So our challenge is not what to do with the business when it’s time to retire, but how to successfully navigate the transition to Generation Two.  The oldest amongst us are now in our sixties.  During the next 10 years there will be many retirements.  For nearly a decade now we have been working on this new task by carefully hiring young, dedicated, passionate people to carry on.  Seventeen of our 28 employees are currently owners; the youngest of these is 34.  During the next year several more thirty-somethings will join the group of owners.  One of these just turned 30.  The transition is in full swing.

I get more and more inquiries for help with employee ownership buy-outs.  Some, like Rick Dubros and Cindi Landreth of A-1 Builders in Bellingham, WA, are winding it down and thinking about this option as an exit strategy and legacy path.  Others, like Brendan Jones of Greensaw Design/Build in Philadelphia, are younger and trying to understand how to build democracy and commitment and parity within their companies.

It’s complicated, and perilous at times, but it’s worth it.

At the time of our re-structuring the full implications of what I was doing were not apparent to me. I was frightened but energized; I did not know where this path would lead. Tremendous rewards and benefits derived from that decision, for me and for the company.  I have the best job I can imagine, due largely to the colleagues who share ownership – and share the ride – with me.  I still get to own it (partly), I still get to run it (partly), and yet I am freed from full responsibility (partly).  Nearly 25 years later I am fully convinced that the conversion to employee ownership has been a critical factor in the modest good fortune we have had and the optimistic good deeds we have done, as well as the many mistakes we have been able to learn from.

I didn’t really know what I was doing.  Mostly, I was lucky.  But as Burlingham says, “Make no mistake:  Sooner or later, every business gets sold, given away, or liquidated, and every entrepreneur leaves the company he or she has built. You may leave feet first, and your estate may handle the sale or liquidation, but both events are going to happen.  They can’t be avoided.  The only question is, How much of a say are you going to have in either one?”

There’s another question:  How deeply will we inquire into the future of our businesses, and to what degree can we influence their continuity and long-term success?

Entrepreneurship is a chance to dream.  As we think about the structure of our businesses we have the opportunity – and perhaps the obligation – to dream about what is possible.

It may be more than we think.  It may be that, when the time does come to leave, we can depart with a reservoir of good feeling and a sense that the ship we have assembled is still afloat, and still heading towards its true destination.  I hope so.

For more information about our employee ownership journey – and those of others – see my book, COMPANIES WE KEEP: Employee Ownership and the Business of Community and Place.