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Pathways to Employee Ownership

A generation of business owners is retiring and many lack a succession plan. In Wisconsin alone, there are over 56,000 individual firms with paid employees whose owners are over 55 year old (U.S. Census Bureau, 2016). Lack of succession planning by business owners will lead to the loss or relocation of thousands of jobs and instability in local economies across the U.S. The economic impacts of coronavirus only exacerbate these issues. This trend is particularly problematic in rural communities where the ability to retain and expand existing businesses is often the best strategy for economic development.

A possible solution to this dilemma can be found in employee ownership, particularly in the form of worker cooperatives. Becoming employee-owned can keep businesses’ doors open, save jobs, and anchor benefit in a community. It is a triple-win solution for the owner, the employees, and the community.

If you’re in Wisconsin and are interested in learning more about converting your business to cooperative ownership, contact Courtney Berner at cberner@wisc.edu. You can find a list of professional services providers for employee owned businesses in the Upper Midwest here.

To find organizations and initiatives that support cooperative development in your region, visit here. Cooperative-friendly lenders can be found here.

Solar panel installation
North Wind Solar is a solar power system design and installation company organized in 2007 in Stevens Point, WI. In 2016, the company began the process of transitioning to a worker-owned cooperative. They saw the opportunity to solicit long term commitment from key employees and to build wealth on their behalf, to improve governance, management, and decision-making, and to build strong relationships with like-minded businesses and organizations in the communities they serve.

Rural Business Retention

Business transitions to employee ownership can be particularly important in rural communities, where the ability to retain and expand existing businesses is often the best strategy for economic development. The University of Minnesota Extension, Cooperative Development Services, and UW Center for Cooperatives recently collaborated to produce the following resources for rural communities, particularly in Wisconsin and Minnesota.Graphic of the state of Minnesota and Wisconsin

Grant funding for this project was provided by the North Central Regional Center for Rural Development at Michigan State University.

Successful Examples

With support from UWCC and others, in 2020 eight worker-owners of Snow River Products kept their union jobs in rural Wisconsin through purchasing their business from the previous owner. This is just one example of successful cooperative conversions.

Members of Snow River Products stand together in front of wall

Stages

The cost and duration of each stage of the deal can vary widely depending on the selling owner’s goals, the complexity of the deal, and the readiness of employees to become owners.

Stages of Transition to Employee Ownership

NATIONAL ORGANIZATIONS

Member for Niles Pie Cooperative sit around a wood table in the pie shop having a meeting.
Niles Pie Company is another example of a business that converted to employee-ownership. Based in Union City, CA, employees hold a Board meeting.

Resources

BUSINESS CONVERSION PROCESS AND CASE STUDIES

Retaining Rural Business Through Employee Ownership (Webinar recording). UW Center for Cooperatives, University of Minnesota, Cooperative Development Services, 2020.

Cooperatives and Business Succession Strategies Webinar (Webinar recording).(Powerpoint). UW Center for Cooperatives, 2018.

Successful Cooperative Ownership Transitions: Case Studies on the Conversion of Privately Held  Businesses to Worker Cooperatives. UW Center for Cooperatives and Democracy at Work Institute, 2015.

Becoming Employee Owned: A Small Business Toolkit for Transitioning to Employee Ownership. Democracy at Work Institute, 2018.

Business Conversions to Worker Cooperatives: Insights and Readiness Factors for Owners and Employees. Project Equity, 2015.

Converting Existing Business to Worker Cooperatives  (Interview with Melissa Hoover from the U.S. Federation of Worker Cooperatives). Democracy Collaborative, 2013.

The Lending Opportunity of a Generation. Project Equity, Cooperative Fund of New England, and Democracy at Work Institute, 2016.

Why Worker Co-op Conversions and Ownership Make Sense Now.  (Webinar). Federal Reserve Bank, Project Equity, 2015. 

 

SUCCESSION PLANNING

An Owner’s Guide to Business Succession Planning. The Ohio Employee Ownership Center, 2008.

Converting to a Cooperative: The 1042 Rollover, ESOPs, and Worker Cooperatives. Co-op Law of the Sustainable Economies Law Center, 2020. 

Ensuring Your Legacy: Succession Planning & Democratic Employee Ownership. The ICA Group, 2016.

The Legacy Project: Video Series. Northwest Cooperative Development Center, 2019. 

 

GENERAL WORKER CO-OP RESOURCES

In Good Company: The Guide to Cooperative Employee Ownership. Northcountry Cooperative Foundation, 2006.

Startup Resources for Worker Cooperatives. Democracy at Work Institute.

See our Worker Cooperatives page for more resources.

 

GROWING THE ECOSYSTEM

Business Conversions to Worker Cooperatives: Insights and Readiness Factors for Owners and Employees. Project Equity, 2015.

City Government Toolkit. Project Equity, 2019.  

Worker Cooperatives: Pathways to Scale. The Democracy Collaborative, 2014.