Transitioning Ownership: A New Era for Massachusetts Businesses
When Dean Cycon, the founder and owner of Dean’s Beans Organic Coffee Co., began planning for his retirement two years ago, he sought a new path for his fair-trade coffee roaster based in Orange. His first step was to bring on Beth Spong, a nonprofit leader and consultant, as the chief operating officer to help navigate the transition. Instead of selling to an outside buyer, Cycon decided to explore the possibility of transferring ownership to his employees.
Under Spong’s guidance, 14 employees pooled their resources to purchase the company. With support from the Cooperative Development Institute, a New England-based nonprofit, the transition was successfully completed. The business, founded in 1993 with a mission to use coffee production to create positive change through ethical practices, is now cooperatively owned and operated. Spong, who initially served as a consultant, has since become one of the owners and is now the CEO.
Massachusetts has long supported small businesses transitioning to employee-owned models. A student-led analysis of the state’s cooperative ecosystems revealed around 200 cooperatives, many located in Greater Worcester. In 2022, the state reestablished the Massachusetts Center for Employee Ownership within the Office of Business Development. This specialized office provides information and resources about employee ownership, highlighting its benefits and aiming to expand opportunities.
Additional support, such as stipend programs, may be introduced in the future through a collaboration with MassDevelopment, which offers financing, real estate, and community development solutions. To publicize these initiatives, the state organized regional symposiums, including one in Worcester in April. These events provided information on various employee ownership models, such as Employee Stock Ownership Plans (ESOPs), Worker Cooperatives, and Employee Ownership Trusts.
Peter Dunn, chief development officer for the city of Worcester, emphasized that employee ownership is a viable exit strategy for retiring business owners. “It helps with economic equity and wealth building,” he said. “It allows for the continuity of a legacy business and retains jobs while serving the community.”
Lisa McCarthy, co-owner of Nonprofit Numerics, believes these supports would have been helpful when her business transitioned to a cooperative. She noted that only two out of seven businesses in her cohort survived, highlighting the challenges of starting from scratch.
Companies can transition to employee ownership through various routes. Some convert existing businesses, like Dean’s Beans, while others start as cooperative ventures. Established companies with proven sales often find the transition easier than new ones.
Legislators have proposed bills to enhance procedural and economic support for employee-owned businesses. The companion bills would establish parameters for owners seeking an exit pathway. Owners would be required to notify employees of a proposed sale 30 days before listing it with brokers. Employees would have the right of first refusal, with a simple majority of full- and part-time workers able to seek financing to purchase the company.
If the legislation passes, it could address the anticipated “silver tsunami” of 200,000 small-business owners retiring in Massachusetts. The agricultural sector is also affected, with about 40% of farmers aged 65 or older. Programs like the Farm Pass initiative help farmers develop transfer plans.
Helen Matthews of the Center for Economic Democracy believes the legislation could solve deep economic challenges. “Business owners retiring without a succession plan or outside buyers could sell to their employees,” she said. The vast majority of Massachusetts businesses are small, defined as those with up to $1 million in annual revenue.
Selling to employees can anchor businesses in the community, keep jobs, and sustain local economies. Between 70% and 80% of small businesses do not find buyers and end up closing. Even if they sell, the process takes an average of 200 days.
Halsey Platt, owner of Platt Builders, is transitioning his business to a worker cooperative. He sees the legislation as a way to normalize this transition. “This new law would normalize this business transition,” he said. While his business does not fit the small business definition, he is eager to make the sale.
Kevin O’Brien, owner of Worx Printing Cooperative, shared his concerns about businesses being sold to out-of-state buyers. He believes employee-owned businesses are more resilient and better equipped to handle economic challenges. They can implement across-the-board furloughs and invest in workforce reeducation.
At Dean’s Beans, operations are shared among employees. Responsibilities are allocated based on strengths, with five daily managers and a five-member board overseeing policy and strategy. All owners vote on major financial decisions, and employees can purchase stakes with as little as $25 per paycheck.
Dean’s Beans continues to thrive, selling wholesale and retail across the U.S. About 50% of its business is direct-to-consumer sales. The cooperative model ensures the business remains rooted in the community, supporting both its workers and the broader economy.