Even before the COVID-19 pandemic, another threat to business continuity was looming — the ‘silver tsunami.’ Canada’s 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.
There’s 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, including newspapers, railway shortlines, stores, theatres, campgrounds, farms and professional services firms.
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 aren’t our governments doing more to encourage BCCs?
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 over 50 per cent of Canada’s 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; Canada’s Co-operative conversion solution could help mitigate the effects of our SME silver tsunami and keep our communities thriving.
Photo courtesy of iStock
