Mass. renews effort to help businesses survive generational change

BOSTON -- With $7,000, Sen. Julian Cyr's parents opened a 20-seat cafe in Truro. Later, they would expand it to a 200-seat restaurant with waterfront views before deciding to step away from the business after 28 seasons.

His parents explored the possibility of selling the restaurant to employees, Cyr said Tuesday, but couldn't make it work, and ultimately sold the space in 2016 to an adjacent motel that now uses it for functions.

"It was a great run, especially for an industry where most restaurants fail in the first five years," Cyr said. "But still, I always kind of couldn't help but wonder, had there been a way to continue Adrian's Restaurant, yes, the Outer Cape would have maintained, sustained one of our favorite restaurants and destinations, but it also would have provided a good life for another family."

Cyr was joined by state and business officials to announce the revitalization of the Massachusetts Office for Employee Involvement and Ownership, which was created by a 1989 law, but was frozen and stripped of its funding amid the last recession in 2008.

Senate President Karen Spilka, then an attorney in the state's Office of Employee Relations, helped draft the 1989 legislation.

In the fiscal 2018 budget, lawmakers included $150,000 in funding to restart the office, followed by another $50,000 in this year's budget.

Cyr said that funding allowed the Massachusetts Office of Business Development to approve contracts in late March with two organizations -- the ICA Group of Northampton and Working Wealth of Cambridge -- to promote existing employee-owned companies and support other businesses looking to make the transition.

"I'm very excited that after many years, we'll be able to restart this, that we will have a resource that folks like my parents can turn to," Cyr said.

Working Wealth's Adam Vartikar said there are 42,000 small businesses in Massachusetts -- with a combined total of more than 750,000 jobs -- whose owners will be looking at retiring in the next seven to 10 years.

Many small business face three options when their owners wish to retire, Vartikar said: sell to a competitor or institutional buyer, pass the company on to their children, or shut it down entirely. He said at least two-thirds of businesses facing that choice close, because the other two options are so hard to pursue.

"With this office, we now have a fourth option," he said. "If you have an employee or you have a group of employees, you have a buyer, and if you live in a community and you love the businesses in that community, they have an option to stay around."

The first wave of Baby Boomers will turn 75 on Jan. 1, 2021, and 10,000 people across the country will turn 75 every day from then on through 2041, said David Hammer of the ICA Group.

"That's who owns businesses in Massachusetts, that's who owns the businesses that are going to disappear and close unless we figure out how to save them," Hammer said. "So we have an enormous crisis in the state of Massachusetts that we're going to be coming across. Unless we really figure out how to integrate business succession planning into business owners' ideas -- what is that next exit -- we're going to lose the businesses."

Harpoon Brewery President Charlie Storey, whose company employs 148 full-time and 61 part-time workers in Massachusetts, said launching an employee stock ownership plan in 2014 when one of the original founders was looking to move on and sell his shares helped Harpoon remain an independent business and preserve local jobs.

Harpoon is currently 48 percent employee-owned and "fully committed" to becoming 100 percent employee-owned by 2025, Storey said.

"Had we not known to go down this path, we would have never taken it, but going down that path wasn't easy, either," he said. "It's a complicated transaction, with an administrative burden. Certainly the benefits outweigh those costs, but those costs are real."

Rep. Paul Mark, a Peru Democrat who has been seeking to refund the office since 2011, also used a childhood experience to illustrate potential benefits for workers at employee-owned businesses.

He recalled being 12 years old and, just before Christmas, learning from a television news broadcast that the warehouse where his dad worked was closing and laying off its staff.

"Employee-owned businesses don't announce on Christmas Eve that they are closing, with no regard to their workers," Mark said. "They have the same chance of success or failure as any other business, but every single person that works there is an owner and part of that process and part of the decision-making process."