Small-business owners are retiring in record numbers. They should sell their companies to their workers

Across America, inequality is rising, wages are stagnating, and inflation is worsening. At the same time, workforce participation is still lower than it was before the pandemic and employers, especially small-business owners, say they’re struggling to find workers. And in the background is the rising “silver tsunami,” the growing population of aging Americans approaching retirement. Baby boomers own 2.9 million businesses, which employ than 32 million people.

As these issues all come to a head at once, some experts say one solution could address all of them: employee ownership. The idea of workers owning a company isn’t new—there are thousands of such companies with that structure, from small businesses like the Local Butcher Shop in Berkeley with just 17 employees to Eileen Fisher with its 1,200 workers. This can take a few different forms—but experts say it’s a model that has often been overlooked.

“It’s such an underutilized strategy tool,” says Alison Lingane, cofounder of Project Equity, a Bay Area-based nonprofit that works to raise awareness about employee ownership, “primarily because people don’t know enough about it, or if they do, they may have misconceptions.” One of the most common misconceptions is that employees need all of the capital themselves or access to a bank loan. In fact, it’s actually the business itself that takes out the loan, which then gets paid back by its profit.

Employee ownership can take a few different forms, from a worker cooperative to an Employee Stock Ownership Plan (ESOP) to employee ownership trusts, but at its core, it’s an arrangement in which employees have a stake, and a voice, in their company. How much employees own can vary: Business owners can sell just a part of their company to workers, or they can make their business 100% employee owned. Project Equity advocates for about 30%, what Lingane calls a “meaningful chunk.”