About the Northeast Transition Initiative (NETI)
NETI is a partnership of organizations and lenders with deep experience in exit-planning and ownership transitions. We share a common goal of equipping small businesses with the tools, resources, and knowledge to support successful exit planning and a seamless transition to employee ownership. In doing so, we believe we can preserve jobs and businesses, increase wealth-building opportunities for employees, and ensure a more prosperous economy across the Northeast.
A Silver Tsunami threatens business, jobs, and growth.
More than 200,000 small businesses throughout New England and New York State have owners who are looking to retire or transition within the next few years. Only 17% of those owners have a succession plan. A wave of aging baby boomer business owners are looking to transition but don’t understand the process or their options and don’t know where to turn for help, posing a great threat to business, job preservation, and growth in our communities.
Organizations that work with businesses are often ill-equipped to assist with exit planning.
Organizations that provide services to business owners have great expertise in growing businesses but are not always equipped to answer questions or provide assistance for those looking for ways to exit a business.
Employee ownership preserves businesses and jobs, and increases profitability.
Employee ownership is a proven strategy to preserve critical businesses and jobs and provide wealth building opportunities for workers who are often left behind. Research has shown that employee-owned businesses are more productive and profitable, create more jobs in the good times, and lay off fewer workers in a downturn.
Ward Lumber is a 4th generation business with two locations in upstate NY. They celebrated a successful transition to employee ownership with Sen. Gililbrand in 2021.
The NETI Fellowship Kickoff Retreat brought together partners and its inaugural cohort of fellows in Andover to share their experiences and to discuss projects that will help to support businesses and business owners in navigating the exit planning process and the employee ownership option.
What is exit planning?
Owners spend their life building a business, but at some point they need to start planning for how to secure their retirement as well as their legacy. That is what thoughtful exit planning can do.
An exit plan is a documented process for how to sell a business for a fair value, while securing the retirement income needed, and thoroughly accounting for the future management, governance and ownership of the business. An exit plan needs to be revisited on a regular basis to ensure it is up to date and still relevant. It involves building a supportive team of advisors and analyzing the financial, legal and tax options that are part of the desired strategy, and having a backup strategy in case the original plan is no longer the best option.
A carefully documented exit plan offers the best chance for a smooth transition that meets an owner’s financial and ownership goals, minimizes tax obligations, and maximizes control of the timing and terms of an exit. Oftentimes, the exit path a business owner originally thought most likely isn’t the path they end up pursuing once they understand the process and have clearly analyzed the pros and cons of various options.
What are the types of exit plans?
Liquidation and closure usually shortchanges business owners of the true value of what they’ve built. More often than not, careful planning can help an owner realize the retirement they deserve while preserving their legacy. Just as every business is different, every exit plan is different. However, the wide variety of options for exiting the business successfully can be broken down into three basic categories:
Open Market Sale
Sometimes business owners can sell to an entrepreneur looking for a new opportunity. Sometimes hiring a business broker can accomplish the goal. Maybe selling to a competitor, customer or supplier is a viable option to consider. Selling your business to an outside buyer is challenging, nerve wracking, and requires careful planning, but, if it’s possible, it can offer the cleanest break. Click here for more information about Open Market Sales.
Family Transitions
Continuing your legacy through a transition to the next generation of the family can be very rewarding, particularly if your children are already involved in the business. However, the strategy comes with a host of unique challenges and the frequency and success rate of family transitions has been on the decline for decades. Maintaining family harmony can be particularly challenging when there are multiple children and a business owner needs to make decisions about what role each of them should play going forward. Click here for more information about Family Transitions.
Selling to Your Employees
Whether it’s a worker cooperative conversion, an employee stock ownership plan, a senior management buyout, or identifying and cultivating an aspiring, entrepreneurial employee, selling your business to one or more of your employees may be the most viable option in many communities. Employee ownership preserves local control and sustains quality jobs and economic activity that the business provides to the community. Click here for more information about employee ownership.
What else would you like to learn? Share your insight with us!