The Quiet Revolution in Business Succession

The Great Wealth Transfer is underway, with six million small and medium businesses expected to shut down or transition ownership by 2035, leaving a $5 trillion question mark hanging over their futures. But amidst this uncertainty, a quiet revolution is brewing. A growing number of business owners are choosing to redefine the very notion of succession, opting for stewardship over sale.

At its core, steward ownership is about creating a lasting impact on communities and employees, rather than just preserving legacy or maximizing profits. This approach rejects the traditional private equity model, which prioritizes profit over people and planet. Instead, owners like Rick Plympton and Mike Mandina, co-founders of Optimax, are charting a new course, one where their businesses remain rooted in their original mission and values.

Optimax’s conversion to an Employee Ownership Trust is a prime example. By donating 20% of their equity to the trust, Plympton and Mandina ensured that the company they built would continue to thrive long after they’re gone. The profits will be shared with employees or reinvested in the business, creating a virtuous cycle of growth and job creation.

Newman’s Own is another pioneering example of steward ownership. Founded by Paul Newman, the company has been giving away all its profits since day one, using its philanthropic enterprise to fund good causes. The Philanthropic Enterprise Act of 2018 gave it the legal framework to do so, but the company’s commitment to purpose-driven business is a testament to Newman’s original vision.

Other companies, such as Kensington Corridor Trust and The Walker Group, are also pioneering new models of steward ownership. Each has its unique twist, but they all share a common goal: to create a lasting impact on communities and employees.

The trend isn’t just about a handful of trailblazers; it’s about a growing movement that’s redefining what it means to be a business leader. Companies like Patagonia, which converted to a Perpetual Purpose Trust in 2022, are joining the ranks, as are individual owners like Michael Bloomberg, who’s donating his shares to finance Bloomberg Philanthropies.

Foundation-controlled enterprises offer a glimpse into what this revolution could look like on a larger scale. Companies like Rolex, Bosch, Carlsberg, Lego, and Novo Nordisk have all paved the way, demonstrating that steward ownership can be both financially sustainable and socially responsible.

As boomers retire, their businesses will undoubtedly face uncertain futures. But with steward ownership models gaining traction, it’s clear that there are alternatives to traditional sale. Owners are beginning to realize that their legacies aren’t defined solely by profit; they’re about creating lasting impact on people and communities.

The quiet revolution in business succession is underway, and its implications are far-reaching. As more owners opt for steward ownership, we can expect a shift in the way businesses operate, with a greater emphasis on purpose and community engagement. The financial dynamics of entire regions could change, as seen in Rick Plympton’s vision for Optimax.

But what does this mean for traditional private equity firms? Will they adapt to this new landscape, or will they continue to prioritize profit over people? And how will governments respond to the growing popularity of steward ownership models?

The answer lies not in the numbers, but in the values we choose to uphold. Business owners are choosing to redefine what it means to be successful, opting for a legacy that extends beyond their own lifetimes. As this revolution gains momentum, let us ask ourselves: what kind of business leaders do we want to create?