RETAIN BUSINESSES

in Los Angeles Council District 9

 

As business owners retire, we help keep these businesses

thriving in our communities

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District 9 Los Angeles, CA

Employee ownership as a strategy for business retention

Los Angeles is the second largest city in the US with a population of 4 million. Each of the 15 council districts are larger than most cities in the nation. Council District 9 or the “New Ninth” in Los Angeles has a population of 285,000 and encompasses a large section of South Los Angeles and includes the western section of downtown. The median income of its residents is $28,600, approximately half that of the county’s, and currently, almost 37 percent of the city’s population lives in poverty.

The district comprises two place-based economic initiative zones, the South Los Angeles Transit Empowerment Zone (SLATE-Z)  and the Goodyear Tract. Both share the mission to revitalize District 9 and increase the quality of life through creating economic opportunity for adjacent neighborhoods and the broader South Los Angeles area. The goal of SLATE-Z is to capitalize on public transit and education through key partnerships in order to increase economic activity thereby reducing poverty for over 10,000 residents by 2026.

The Goodyear Tract is an active industrial complex of over 200 businesses and a total of 4,000 employees. With a dense population of over 500,000 people living within 3 miles of the district, the diverse collection of manufacturers and small businesses, provides a key entry point for entrepreneurs and good job opportunities for nearby residents.

District 9 seeks to curb the effects of the Silver Tsunami

Small, locally owned businesses are essential to the 9th District’s local economy and community vitality. Among the challenges the city faces is keeping small businesses and the jobs they provide rooted in the community, as the Silver Tsunami – the retirement of baby boomer business owners – impacts District 9.

The city is taking a proactive approach to assist locally owned businesses that are at risk of retention by partnering with Project Equity to help them learn about the option of employee ownership succession. Los Angeles is already the home of many successful employee-owned businesses and California has, by far, the highest number of employee-owned businesses of any state in the US. 

 

The silent risk of the Silver Tsunami

Baby boomers (those born between 1946-1964) own nearly half of all businesses with employees in the Los Angeles metro area. Cities and regions need to understand the risk of the so-called Silver Tsunami as these business owners retire. The risk is that these legacy businesses won’t be retained locally — either because they quietly close down, are sold to out of area buyers, or simply don’t have a succession plan as the owner marches into retirement.

District 9’s proactive approach

District 9 is taking a very proactive look at this issue and is supporting local and employee ownership succession. The district has partnered with Project Equity to shine a light on the need for smart succession planning and to develop an effective strategy to engage with their legacy businesses. Project Equity performed an analysis for District 9 to quantify the number of privately-held companies with employees that are 20 years or older — a good indication that they need succession planning — and the impact if these businesses are not retained.

Companies that are 20 years old and over in the 9th District:
  • Represent over 700 of the district’s businesses
  • Employ almost 12,000 individuals
  • Generate over $3.75B in revenue

 

Local ownership over the long-term

Keeping companies locally owned over the long term is a critical economic development strategy. Only 15 percent of businesses get passed onto the next generation because the kids aren’t interested in taking over their parent’s business. According to BizBuySell, the largest online marketplace for businesses, only 20 percent of businesses listed for sale ever sell. We clearly need more strategies for local business succession to avoid businesses inadvertently closing their doors due to lack of planning. The good news is employee ownership is viable for many companies, and it provides similar benefits to family ownership.

Employee ownership may be unfamiliar to many, but it keeps companies rooted in place, provides quality jobs and strengthens businesses for the long-term. It also offers a ready solution to the retiring business owner: there’s a buyer right there under your nose — the very employees who helped you build the company.

Local ownership is important to our region’s future. Let’s make sure the Silver Tsunami doesn’t put us at risk.

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Project Equity welcomes Coro Fellow, Eric Medrano

Eric Medrano is a Fellow in Public Affairs at Coro Northern California, with a passion for social impact in mid- to low-income communities. He spent four weeks with Project Equity to research an expansion strategy using employee ownership as a way to help low-income communities.

Berkeley supports employee ownership

On February 26th, 2019, The Berkeley City Council adopted a set of recommendations provided by the Sustainable Economies Law Center (SELC), based on significant input from Berkeley worker cooperatives, organizations that support worker cooperatives (including Project Equity) and city staff.


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