City of Santa Clara logoToday, the City of Santa Clara launched an initiative to assist locally-owned businesses that are at risk of closure to learn about the option of employee-ownership. The initiative highlights the need for succession planning for local small businesses. It focuses on transitions to employee ownership to address hundreds of Santa Clara business owners’ potential retirement.

The City’s investment in this initiative is critical to preserving local businesses’ legacy given the high percentage of owners that do not have succession plans. “Small, locally owned businesses are essential to Santa Clara’s economy and community vitality,” said Santa Clara Mayor, Lisa M. Gillmor. “Now, more than ever, solutions are needed that create economic resiliency for workers and local economies.”

The initiative will be implemented in collaboration with Project Equity and the Democracy at Work Institute, which are nonprofit organizations with Bay Area headquarters, and supported by a new data study from Project Equity. The study revealed that preserving such businesses will have significant impacts on local jobs and the economy.

“Among the challenges the City faces is keeping small businesses and the jobs they provide rooted in the community. In addition to our small business relief program, we now are able to offer a broader range of services through this succession planning and owner initiative,” said City Manager, Deanna J. Santana. “Small businesses are the backbone of our local economy and we need to continue to be creative about how we support small businesses. This is a win-win-win for business owners, workers and our community.”

Project Equity analyzed data on privately-held businesses located in the City of Santa Clara that have employees and are 20 or more years old to illustrate the impact if these businesses are not retained. With COVID-19, more owners might accelerate their exit from a business because it could take months to return to a normal level of operations.

The study found that there are 1,138 companies (which is less than 20% of the total businesses) in the City of Santa Clara that have been in business for 20 or more years, yet they employ an estimated 33% of the City’s private-sector employees (20,000) and generate about 57% of small business revenue ($6.2B).

“This data study, along with previous research that estimated 80% of business owners do not have succession plans, demonstrates the importance of reaching Santa Clara’s small business owners to help them understand their succession and selling options,” said Hilary Abell, co-founder, Project Equity.

Employee-owned companies increase job quality and have proven, positive impact on job creation and on business retention. A study conducted by Rutgers University found that, during the COVID-19 pandemic, companies owned by their employees are proving to be more resilient than companies that are not employee-owned. They are also more likely to retain staff, maintain worker hours and salaries, and protect their worker’s health and safety standards.

“People are looking for solutions. The worker cooperative sector has a solution,” said Melissa Hoover, Executive Director for Democracy at Work Institute. “In supporting succession pathways which include worker-owned cooperatives, we also support an economy where working people own their jobs, communities own their assets, and we all participate in the decisions that matter. This solution must be integrated into long-term recovery efforts.”

Visit SantaClaraCA.gov/WorkerCooperative for more information and to sign up for upcoming virtual educational session.