The Silver Tsunami and the Opportunity of Employee Ownership in Washington, DC
By Jennifer Bryant, Program Manager – Community Wealth Building Initiatives, Wacif
More than 35 years ago, Mike Smith founded Smith & Sons, a successful general contracting business in Washington, DC. Now 68 years old, Mr. Smith is ready to retire and transfer ownership of his business. He is not alone. On average, 10,000 baby boomers retire each day. This mass exodus is known as the “Silver Tsunami” and it has huge implications for both the national and local economy, the workforce and the communities we live in. Nationally, baby boomer business owners employ more than 24 million people and generate more than $5 trillion dollars in revenue annually.
The impact is just as significant on the local level. The Democracy at Work Institute (DAWI) found that there are approximately 2,650 business owners of color nearing retirement in Washington, D.C. These business owners employ more than 38,000 people and generate more than $4.2 billion dollars in revenue annually. The economic impact of baby boomer business owners retiring en masse could lead to a crisis or a profound opportunity.
The Washington Area Community Investment Fund (Wacif) views it as an opportunity. Together with Citi Community Development, Wacif leads the DC Employee Ownership Initiative to preserve legacy businesses and create new pathways to entrepreneurship.
“Nearly 40% of African American business owners in Washington, D.C. are nearing retirement age,” said Robert Burns, Senior Vice President and Greater Washington Market Manager at Citi Community Development. “By collaborating with Wacif, we aim to preserve existing businesses and catalyze new ones, so that residents, especially people of color, can access ownership opportunities and build wealth. The effort builds off previous investments and research on employee ownership supported by Citi Community Development at the national level.
Smith & Sons was one of the first businesses to express interest in employee ownership when the initiative launched in late 2018.
Mike Smith has a longstanding relationship with Wacif – as a Wacif client, Mr. Smith accessed both technical assistance and capital to grow and expand his business. Now, as he prepares to enter retirement, he has turned to Wacif to explore the possibility of selling his business to his employees.
“Employee ownership is very important to us because we want to maintain the legacy of the company and the spirit with which it was built,” said Mr. Smith, CEO of Smith & Sons. “Our employees have been a very valuable asset, and employee ownership will allow us to reward them for their work and ensure that they’re directly invested company’s future.”
In May, Mr. Smith sat front row of a workshop on “Exit Planning and Employee Ownership” – the first in a series designed to introduce retiring business owners to the exit planning process and the two primary forms of broad-based ownership: Employee Stock Ownership Plans (ESOPs) and worker-owned cooperatives. The free workshops are an entry point for business owners to explore employee ownership conversions – the sale of existing businesses to their employees – as an exit option. Wacif has formalized a conversion partnership with the ICA Group, a non-profit that has helped businesses form and convert to worker ownership for more than four decades. The goal of the partnership is to convert 3-5 businesses to employee ownership over the next 2 years.
In addition to supporting conversions, the DC Employee Ownership Initiative will also provide technical assistance and access to capital for emerging and existing worker-owned cooperatives. The Initiative is part of Wacif’s broader vision to serve as a catalyst for the resurgence of an employee ownership ecosystem in the DC region.
Nationwide, employee ownership is experiencing a renaissance as a powerful tool for building community assets and ensuring that legacy businesses remain community anchors as business owners retire.
Mike Smith built Smith & Sons in Washington, DC against the backdrop of widening racial wealth inequality. For him, employee ownership is about more than just selling his business. It’s about preserving his legacy and giving the employees that helped build his business the tools to stay in DC and build wealth for themselves.