CLARIFICATION: While worker-owned cooperatives are seen as one of many solutions to the expected wave of small-business owners retiring, organizers with the May Day Cafe initiative note that aging ownership is not related to their transition. (10:00 a.m. CST, August 14th, 2024)
As small-business owners decide to retire or move on, some are helping to fuel the trend of worker-owned cooperatives in Minnesota and elsewhere.
These operations are described as businesses owned equally and self-managed by participating employees. A 2021 report found a 30% increase in worker-owned cooperatives in the United States, with nearly a dozen in the Minneapolis/St. Paul area.
When staffers at the May Day Cafe in South Minneapolis heard of it being put up for sale, barista Mira Klein said they were energized to launch an effort to buy it themselves and keep this community fixture open.
"It felt really important that the cafe stay in community hands," she said, "and continue existing as a place that people could gather, that they could eat together, access affordable food."
Klein said she's interested in how this affects workers by having a greater say in decision-making. With the help of a new crowdfunding campaign, the workers hope to close on the sale later this year. The same report tracking this movement also touches on some of the challenges these cooperatives run into, and providing health insurance topped the list.
According to the group Project Equity, 49% of businesses across Minnesota are owned by people age 55 and older. As the "silver tsunami" plays out, Klein, who stresses that aging ownership is not a factor in May Day Cafe's planned sale, said they want the chance to demonstrate that this approach can be a viable response to broader transitions in the small-business landscape.
"Showing that a worker cooperative model can be successful in a place like May Day, that could potentially have some pretty far reach," she said, "and that's something that we're really excited about."
The Project Equity report said nationally, one in three business owners age 50 and older are having a hard time finding a buyer. The authors say handing the keys over to willing staff members can lead to increased longevity of the business, better pay for workers, and increased local spending in the community.
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A new survey of public company audit firms reveals businesses are concerned the upcoming election could affect their financial performance.
The Center for Audit Quality found more than 60% of roughly 1,200 audit partners surveyed worry about potential disruptions.
Julie Bell Lindsay, CEO of the center, said few companies are adjusting their business strategies.
"It suggests that while businesses expect some market turbulence and some uncertainty, they feel equipped to navigate through that," Lindsay explained.
Delta Air Lines recently said election-related uncertainty would affect its fourth-quarter revenue as consumers hold off on discretionary spending. Lindsay added geopolitical concerns also remain a top risk factor for businesses, as conflicts in Ukraine and the Middle East continue to affect the global economy.
Despite ongoing resilience, audit partners' outlook for the economy over the next year is only neutral, with most believing a recession is likely on the horizon. Lindsay noted audit partners are watching for potential indicators, including recent federal rate cuts, a possible government shutdown and a fluctuating labor market.
"They also continue to see that inflation could be an ongoing concern over the next twelve months," Lindsay reported. "I will say that the audit partners in our surveys have been pretty accurately predicting what inflation is going to do."
Lindsay emphasized top priorities for businesses in 2025 remain cost management, improved financial performance and growth. She said labor shortages are no longer a priority among economic risks as employers seek to upskill workers and increase compensation. Still, layoffs and decreasing workplace flexibility remain top strategies for companies to improve their bottom line.
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Despite Indiana's recent high-profile business deals, the state's economic fundamentals are lagging, with declining income and education levels posing significant challenges.
Experts argue deeper investments in education and infrastructure are needed for sustainable growth.
Michael Hicks, director of the Center for Business and Economic Research at Ball State University, noted some troubling figures.
"The share of adults with a college degree relative to the country having slipped," Hicks noted. "We see our per capita income relative to the country has slipped substantially, two percentage points, which is sort of a shocking three-decade change in two decades."
Although state officials pointed to low unemployment and rising capital investments as proof of success, Hicks contended without a focus on education and infrastructure, Indiana's long-term economic outlook remains uncertain.
State officials highlighted new projects such as a $3.2 million investment in Kokomo by Stellantis and Samsung SD designed to expand electric vehicle battery manufacturing operations in Indiana as signs of progress. However, Hicks warned the announcements do not address deeper economic issues.
"The numbers they're sharing are just measurements that they have working through IEDC (the Indiana Economic Development Corporation)," Hicks observed. "It has nothing to do with the actual amount of capital that's flowing into the state. That's lower than it has been in most years. So, there's nothing fabulous happening now that is anything other than a press release."
Hicks believes Indiana should prioritize education, environmental policies and regulatory improvements to create sustainable growth.
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Just as inflation starts to ease, Mississippi small businesses face another looming threat: the potential expiration of the small business deduction.
It is also called the Qualified Business Income deduction and if Congress does not renew it, it could affect nearly 266,000 small businesses in Mississippi, which employ more than 430,000 people.
Leah Long, Mississippi state director for the National Federation of Independent Business, said the Main Street Tax Certainty Act, which has bipartisan support, is set to expire in 2025. It is the law allowing small companies to deduct up to 20% of their qualified business income.
"It's a massive hit to their business, because they rely on that," Long stressed. "They're also facing issues like inflation, cost pressure and the uncertainty of the economy. So right now, the biggest focus is on that and getting the congressional members to sign on to support it, to reinstate it and make it permanent."
The Federation's August jobs report found 40% of small business owners had job openings they could not fill in August, up two percentage points from July.
Long pointed out if no action is taken by Congress, it would amount to a big tax hike for nine out of 10 small businesses nationwide, compromising their ability to grow and hire workers.
"When small businesses are doing well and they have more money, they're able to invest more into their business, they're available to best invest more into the economy and also in their communities," Long explained. "These small business owners are the ones that sponsor your kids' T-ball team."
She noted while measures like the Inflation Reduction Act have provided some aid, passing bills like the Main Street Tax Certainty Act will be crucial to support Mississippi business owners.
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