Part of the America’s Entrepreneurs Special Report
Gerald John, just shy of his 75th birthday, has been a barber in Ord, Neb. — population 2,014 — since 1961 (with a two year break with the U.S. Army). He bought the barbershop in 1973. When John started thinking about retiring about two years ago, he hoped someone locally would take it over. “I didn’t want to shut the doors,” he says.
John advertised for a new owner but, in a fairly typical experience for rural entrepreneurs, he had zero takers. His son suggested John talk to the local economic development director, Trevor Lee, for possible leads. Lee easily made a match — his wife, Amy, 31, who was experienced in cutting hair and had managed salons in the Denver area. “I wanted to get back into doing hair,” says Amy. She bought the business and building, gutted and remodeled the barbershop and recently reopened it as The Boardroom. John retired in December, 2016.
“She fixed it up the way she wanted,” says John. “I’m real happy for her.” The new owner adds: “I hope to keep the traditions that Gerald had alive.”
RedTire (short for Redefine Your Retirement) brokers succession deals in the state’s rural areas free of charge.
Small-Business Succession in Rural America
Small-business succession is an increasingly important topic in rural America, where entrepreneurs now in their 60s and 70s often have a rough time finding people to buy and take over their mom-and-pops. Fortunately, a growing ecology of organizations and businesses are matching rural entrepreneurs nearing retirement with younger people yearning to run businesses. Public university extension services, economic development agencies, bankers, business brokers and succession consultants, among others, offer matchmaking services and intelligence.
For example, RedTire (short for Redefine Your Retirement), housed at the Kansas University School of Business in Lawrence, brokers succession deals in the state’s rural areas free of charge. And The Center for Rural Entrepreneurship, based in Lincoln, Nebraska works with communities across the country and in Canada to boost their attractiveness to a new generation of potential small business owners. Many of these outfits also provide services and resources to help the new business owners succeed.
Why the Loss of a Business Hurts More Here
Like their urban cousins, small rural businesses increasingly find themselves threatened by e-commerce, national chains and regional industry consolidation. But if an owner in a rural town retires without finding a successor, the economic and social loss of a shuttered business can be particularly acute for the small community.
“The loss of a business leads to less employment and school funding, for example,” says Odee Ingersoll, director of the Kearney Center at the University of Nebraska. “So we see business succession as something that is very relevant.”
A Dental Hand-off That Made Both Sides Smile
To see how a matchmaker can be a win-win, just ask Dr. Steven Epler of Yates, Kansas, a former dentist. After 35 years working and ready to retire, Epler worried that he would have to follow the unfortunate example of several peers and shutter his practice.
Instead, RedTire did a valuation, outlined the steps for Epler to transition the dental practice to a new owner and matched him with young dentist, Dr. Matthew Standridge, who had opened his first office in Eureka in 2012. Earlier this year, Standridge merged the offices into one: the newly remodeled Yates Center.
‘Doom, Gloom, and Dark Decline’
Smart hand-offs like this are often successful for the new owners. Liz Templin, community economics educator at the University of Minnesota Extension, identified 358 businesses in rural Minnesota that sold from 2008 to 2012 and then surveyed 176 of the ones that were still around three years later. Turns out, 87 percent of those new business owners had either maintained or increased the number of employees; 69 percent had increased sales volume; and 68 percent boosted their customer base.
These results don’t surprise her colleague, Ben Winchester, a research fellow at University of Minnesota Extension Center for Community Vitality who has been combing through Census Bureau stats. Winchester says his results dispute the typical picture of rural America as a place of “doom, gloom and dark decline.”
Yes, he concedes, rural America’s twentysomething population often leaves for urban opportunities. But, he adds, there is an underappreciated countervailing trend: The in-migration of the 30-to 49-year-old cohort. (Remember Amy Lee?) Winchester has dubbed this cohort rural America’s “brain gain,” since the newcomers bring significant education, skills and connections to rural communities.
“They’re entrepreneurial. They bring a business with them, they start a business, they buy a business,” he says. “But it’s all about choosing a quality of life.”
Why These Transitions Can Be Hard
That said, such transitions aren’t easy.
Rural small business owners are often reluctant to open up their books. One reason: family members may be on the payroll and their personnel expenses are paid by the business.
Also, older owners of rural small businesses usually don’t carry debt. That’s smart personal finance, but a signal to potential buyers that the new owners will likely need to invest in upgrading equipment and facilities.
Consultants recommend at least three years to get a rural business in shape for sale. “There are huge opportunities for local businesses to be competitive by finding and adding niche markets,” says Don Macke, co-founder of the Center for Rural Entrepreneurship.
Connecting the Generations
The matchmaking efforts to broker deals illustrate a critical issue with America’s aging population: Intergenerational interdependence.
At the recent Summit on Business and the Future of Aging I attended, sponsored by the Milken Institute Center for the Future of Aging and the M Center for Excellence, participants came to realize that they weren’t discussing just prospects for older Americans. The conversation kept coming back to how increasing economic opportunities for an aging population also improved prospects of younger people. That couldn’t be truer in places like Ord, Neb. and Yates, Kansas, where small businesses continue to thrive, against the odds.
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