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The Most Powerful Tool for Small Business Owners? Employee shareholding: Jeanette Webster

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CLEVELAND – We cannot escape the economic impact of COVID-19 on our communities. According to the Federal Reserve, economists estimate that businesses shut down at a rate of about a quarter to a third above normal in the first year of the pandemic. And, week after week, America’s small businesses have consistently reported negative effects because of the challenges they faced during the pandemic.

Even in good times, we know that America’s small business owners stay awake at night worrying about the future – not only for themselves and their businesses, but also for their communities, customers, and employees. And this should come as no surprise, because small businesses employ almost half of all American workers; these owners have a great responsibility.

At last count, in April, the share of small businesses in Ohio still closed due to the pandemic was 30.4% —Ranking our state 21st out of 45 states surveyed, according to Center Square.

The pandemic effect adds to another crisis we were already facing: 80% of business owners do not have a succession plan, according to the 2019 survey of business owners by the Business Enterprise Institute, and half of Ohio’s small businesses are owned by baby boomers nearing retirement, according to Sept. 14 “Building Legacies.” report of Ohio Worker Ownership Network.

Employee share ownership, or EO, ​​is a powerful solution for small business owners looking to secure the future of their business, the well-being of their employees, and the livelihoods of their communities. From employee share ownership plans to worker cooperatives to employee share ownership trusts, EO enables small businesses to achieve their goals, helping to:

Increase profits,

Motivate employees,

Provide capital for growth, and

· Secure fair value for exiting owners upon retirement.

During this pandemic, we have seen companies owned by their employees perform better, overall, than their peers: OT firms were less likely to shut down or fire employees, and more likely to institute safety measures to protect their workers.

Here in Cleveland, I saw with my own eyes how EO has helped keep doors open and legacies alive: Bay insulation worked with our team to switch to employee shareholding. From that point on, thanks to this pandemic, the East 25th Street business doubled in size and continued to grow. And now, every time the satisfied and dedicated Berry Insulation employee-owners come to work, they put their time and resources back into their Cleveland community.

Jeanette Webster is Director of Investments for Evergreen Cooperatives’ Fund for Employee Ownership.

In terms of employee shareholding, Berry Insulation success is the norm, not the exception. But looking around the Cleveland area and across the country, I see far too few small businesses taking advantage of all the benefits that come with OT. Some may not have heard of employee share ownership. Others may not understand all of the ways it can help alleviate the worries that keep them awake at night.

To strengthen small businesses and their communities, and boost opportunities for wealth creation, I have partnered with nonprofit partners across the country to help spark a national movement towards employee ownership. We know that OT is a powerful tool in which small businesses thrive, workers get better jobs, and sustainable communities thrive.

The mission-driven nonprofits behind the new “EO Equals” campaign believe in the power of EO for business owners and communities, and over the next year we invite all owners to small businesses to see what EO means to them. Whatever they discover, small business owners will open up employee ownership opportunities and have the support of a nonprofit partner to move to the EO model that is right for their business.

October is Employee shareholding month, a great time for small business owners in Ohio and beyond to take a closer look at EO. As we look beyond the pandemic to strengthening our communities, employee ownership can be a powerful tool for small businesses around the world.

Jeanette Webster is the Chief Investment Officer of Evergreen Cooperative Fund for Employee Ownership in Cleveland, where she supports sustainable jobs through the acquisition and transition of businesses to employee ownership. She is also a founding partner of EO Equals.

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