EVEN before the COVID-19 pandemic, another threat to business continuity was looming the silver tsunami. Canadas 1.2 million small- and medium-sized enterprises (SMEs) community has been bracing for the departure of nearly three-quarters of its owners, who plan to retire within the next decade.
Often, the intent is for owners to transfer the company to relatives or sell to a third-party purchaser. The reality is that either way, many entrepreneurs have yet to draft a formal succession plan or are unable to execute it due to various factors, heightened by the COVID-19 reality.
Theres a lesser-known, but proven, third option that rarely gets the attention it deserves.
SMEs could also consider selling the business to employees or community stakeholders who have formed co-operatives. Such transitions, known as Business Conversions to Co-operatives (BCC), are a tried-and-true solution for rescuing businesses or for succession planning in numerous jurisdictions around the world.
Lack of knowledge about BCC as an option here comes at a significant cost to Canada.
If there was more knowledge of this concept throughout Canada, potentially thousands of companies and the jobs they provide could continue to operate. Successful examples of BCCs have been documented in Canada across multiple industries.
These include such diverse stories as the Battle River Railway, where a group of farmers formed a co-operative to purchase a shortline railway so they could continue its operation and transport their produce to high-throughput terminals. Theres also the community of a remote town coming together to safeguard their only grocery store, now known as the Épicerie Moonbeam Co-op Grocery.
In Canada, co-operative conversions can take many forms. Retiring owners
can either sell to the staff or to
others as part of a community or
Another example is Arise Architects, where a retiring business owner transitioned his business, with the support of staff, into an employee-owned co-operative.
There are such stories across Canada, and Manitobans can reflect on how conversions played a role in keeping local businesses going, when buying tools at Pollocks Hardware Co-op Ltd. on Main Street in Winnipeg or getting equipment repaired at Standard Machine Works, for example.
If more SME owners understood co-operative conversions as an option, it would prevent them from just permanently closing their doors and stripping communities of jobs, products and services. This is particularly pertinent for rural, remote and northern communities, where this economic activity is so important.
In Canada, co-operative conversions can take many forms. Retiring owners can either sell to the staff or to others as part of a community or multi-stakeholder buyout. In Quebec, a worker-shareholder co-operative, formed by the employees of a business, can also enter co-ownership agreements with the traditional investors who own the business.
So why arent our governments doing more to encourage BCCs?
If this proven solution were further embraced, funded and promoted by various levels of government and other stakeholders from the business community, it would enable and accelerate conversions to consumer, producer, worker and multi-stakeholder co-operatives, depending on the local needs.
This could be accomplished with the assistance of programs such as the Cooperative Support Buyout Program in Quebec, by encouraging participation in the Investment Readiness Program of the Social Innovation and Social Finance Strategy, or by leveraging existing sector led co-operative development funds.
In addition to the transition solution that conversions can offer, it should be noted that former owners can also become members of the newly formed co-operatives, as part of a staged retirement and knowledge transfer plan. The Conversion to Co-operatives Project found that more than 50 per cent of Canadas SME owners do not desire to fully retire and that a BCC could provide a tangible way to stay involved and secure their legacy.
Co-operative associations and federations can assist businesses looking into the BCC option. But more needs to be done at the provincial and federal levels to showcase BCCs more widely as a legitimate pathway; Canadas co-operative conversion solution could help mitigate the effects of our SME silver tsunami and keep our communities thriving.
Marcelo Vieta is an associate professor and co-director of the Centre for Learning, Social Economy & Work (CLSEW) at the University of Toronto. Daniel Brunette is the director of advocacy and partnerships at Co-operatives and Mutuals Canada.