[rocketpastsix]

I think part of the problem with the succession idea is that a lot of people in these positions worked these hard jobs to try and give their kids a better life. They encouraged their kids to go to school for their passions and now those kids are in careers far removed from what their parents did.

Instead of succession, I wonder if there is a way to make it easier for these people to sell their company when its time to retire to someone who is looking to start the next step of their career. A lot of software engineers joke about becoming farmers, but if they could instead make an easy transition into a small business by buying a small business, we could prevent PE from raiding things.

[ryandrake]

The vast majority of people can’t just go out and buy a machine shop or laundromat and then start running the business. It’s a risky asset, not like a house where you put down 20% and any bank will loan you the rest. I’d love to own a small franchise restaurant or something in my town but they cost millions that I don’t have.

And that’s before you even make it to the question of “can the person that manages to buy it actually live off of it as a lifestyle business?”

[rocketpastsix]

sure but a restaurant is always going to be a risky asset. I am thinking more in terms of a plumbing business. It's a business that will always have a need, no matter the economy because a bursting pipe doesnt care if its a recession or a booming market.

I guess what I would like to see is a pathway to making it easy to buy or start up crucial businesses like a plumbing business, HVAC company, etc. As the current generation of owners want to sell and retire, we should make it easier for people to be able to get in there and buy these companies before PE can.

[antasvara]

A plumbing business doesn't have "assets" though; it's valuable because the owner is good at their job. You can't durably "sell" that brand value unless the new owner is also known to be great at their job, at which point they don't really need to buy your business.

Family businesses handle this by slowly getting the next generation involved, such that the intangible value has been transferred by the time the owner wants to retire. That works less well with a stranger. You really need high levels of trust to make that work fairly for both parties.

[ryandrake]

I wonder what would make it easier for a regular person to buy a mom-n-pop plumbing business, besides financial help? If the owner wants $5M for it, and you (or a PE firm) walk up to him with $5M, it's yours. The mechanics of buying the business aren't particularly hard--the hard part is obtaining the capital.

[bombcar]

The thing is those businesses can't really be "sold" because they make enough money to support a few families, but they can't do the same AND carry the debt-load necessary to buy it.

So they can only really be inherited or given away (and they often are).

But if it's not to kids on death, it's moderately difficult to give away a business that has "paper value".

[ryandrake]

Yea, I occasionally go to estate sales, and a machine shop going out of business popped up on my radar. Went down there to buy a few power tools, chatted up the elderly owner, and asked him why he was selling everything. The shop had everything, and would have been a really cool business to own and operate! He said 1. his adult kid had no interest in running the business, and 2. he couldn't find anyone willing and able to buy it for more than he could get by "parting it out" and selling all the assets.

I'm sure there are tons of people in my local area who could happily and successfully run such a business, but nobody can swing it financially. The initial financial hurdle of going from "not a business owner" to "a business owner" is real.

[bombcar]

Yep, and if you're starting on your own, you might as well get new equipment and such built and made for you.

Same thing happened with a restaurant - nobody wanted to buy the business so it shut down, even though you could have bought the whole business for the cost of the building, basically.

(There's a path for entrepreneurial "youngsters" - identify these businesses 10 years before, and become a valuable employee in such; I've seen them given away for a song to such. Of course, in some of them they also ended up with the daughter, so ...)

[maltyr]

I think the other thing is the older generation are of the opinion that a steady paycheck is somehow safer than owning your own company, mostly because most of them never sat in the other side of the table.

This leads to them pushing their kids to be employees even though that's...really contradictory to their actual lived experience.

[rocketpastsix]

yea the side of the table they sat on is one that fluctuates month over month, year over year. They recognize that it can work out, but its a gamble whereas working for a steady company (pre 2026 I guess) is the better option for their kids.

[deepfriedchokes]

We should be encouraging employee stock purchase plans with tax incentives. [0] It’s better for the businesses and better for our communities than PE.

[0] https://en.wikipedia.org/wiki/Employee_stock_purchase_plan

[quickthrowman]

I think you meant ESOP (Employee Stock Ownership Program), not ESPP. I work for a 100% ESOP company and it’s been very beneficial to me and also the former owners were able to cash out without selling to the devil.

https://en.wikipedia.org/wiki/Employee_stock_ownership_plan

An ESOP is where a portion of or an entire company is sold to the employees. Our company took out loans to acquire the shares from the former owners and shares are disbursed to employees yearly instead of purchased by employees. It took 5 years to fully buy out the former owners, so we’re a 100% ESOP now and we just finished paying off the loans taken out to buy out the former owners.

An ESPP just gives employees of a company the option to buy shares at a discount.

[deepfriedchokes]

You are correct ESOP was what I was thinking of. Thank you for the correction. Worked great for Bob’s Red Mill I believe. Glad to hear it’s been a success for you and your company.