Wednesday, May 10, 2017

Services help find younger owners to take over for rural business owners looking to retire

A growing number of services match rural entrepreneurs nearing retirement with younger people looking to run a business to ensure that a small town doesn't lose much-needed services, Chris Farrell reports for Next Avenue, a Forbes magazine news service for people over 50.

RedTire logo

Farrell cites RedTire, housed at the University of Kansas Business School, which "brokers succession deals in the state’s rural areas free of charge. ... The Center for Rural Entrepreneurship, based in Lincoln, Neb., 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."

As an example of how RedTire works, when Dr. Steven Epler, a former dentist in Yates, Kan., was ready to retire after 35 years, he turned to RedTire in the hope that his practice wouldn't have to shutter, Farrell reports. "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, Kan. in 2012." Earlier this year, Standridge merged the offices into one facility.

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," Farrell writes. She found that 87 percent of the 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.

There are some obstacles, Farrell notes. "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."

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