CASE STUDY

Project Equity

Stemming job losses by helping exiting owners of small businesses transition to employee ownership

Benjamin Jones
P Cubed
Published in
7 min readFeb 1, 2022

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Photo by Joshua Rodriguez on Unsplash

Mission: To raise awareness of employee ownership and demonstrate the benefits of transitioning to the model for exiting business owners, workers, low-income communities and others, with a focus on scaling for wider systemic impact to foster economic resiliency.

The Multiplier Effect: Help Project Equity scale by building complex financial management systems, building a loan fund to enhance impact for new employee-owners, and hiring a strong team, preparing the project to pursue greater systemic impact.

Small businesses are rapidly disappearing across the U.S. The COVID-19 pandemic has caused job losses not seen since the Great Depression. And it came on top of a “silver tsunami” already underway: Retiring baby boomers are leaving the businesses they own behind, often without a succession plan in place.

Photo by Marco Bianchetti on Unsplash

This shift is a serious loss for our economy. Small businesses make up over 99 percent of businesses and provide almost half of all jobs in the U.S. Locally owned businesses circulate three times more money back into the local economy than absentee-owned businesses or corporate chains. And local businesses are based on local relationships, fostering trust and civic engagement. While 6 out of 10 business owners plan to sell in the next decade, many will have trouble finding buyers. Losing these businesses to closure leads to widespread job loss and reinforces the racial income gap.

Project Equity seeks to reverse this trend by encouraging exiting owners to transition their businesses to employee-owned models, with the ultimate goal of increasing job availability, quality, wages and stability for low- to middle-income workers. According to a 2019 report by the Rutgers Institute for the Study of Employee Ownership and Profit Sharing, employee ownership can provide “a significant wealth accumulation effect for all,” and especially for low-income individuals and families. The report also notes that people of color, women and single parents working at employee-owned companies have higher median wages than those working for non–employee-owned companies.

To increase employee ownership, Project Equity focuses on well-established businesses, working with them from early exploration to transition and beyond. The Project Equity team helps owners and workers determine whether employee ownership is a good fit for the business, assess the financial feasibility, structure the deal, execute the sales agreement, create a transition road map, and implement training and support programs to ensure ongoing success.

“Many retiring baby boomer business owners are unable to sell and don’t have children who want to take over the family business,” says Project Equity co-founder Hilary Abell. “By facilitating the shift to employee ownership, Project Equity is saving jobs and providing workers who otherwise wouldn’t have the chance to build wealth with the opportunity to do so.”

The launch: Seeking expertise to realize a clear vision

Abell and co-founder Alison Lingane founded Project Equity to advance their shared interest in creating better jobs and a fairer economy. They had complementary skill sets — Abell had been involved with employee ownership and worker co-ops for years, while Lingane had a track record of scaling mission-driven companies — and they quickly landed two years of seed funding. Social impact startup incubator Echoing Green helped them get off the ground. But the pair realized they needed more support and went looking for a home where they would have access to the full spectrum of nonprofit backbone services and sophisticated finance expertise.

They found all that and more at Multiplier. Abell says they soon came to depend on Multiplier’s strategic advising support and Executive Director Laura Deaton’s mentorship: “When we first were introduced to Multiplier, we were really only looking for a fiscal sponsor, but we got so much more. The team’s body of knowledge and offerings are extensive. Everyone has been highly responsive and ready to help however they can, and Laura is always right there and willing to help us dig into any challenge we encounter.”

Likewise, Deaton was impressed by the founders’ experience and vision. “Their theory of change was clear, and we knew they were going to scale,” she recalls. “We also knew that they needed an extended team that could manage the complexity of their finances and help them build out their staff and partnership development.”

The strategy: Deploy a full financial tool kit to scale impact

Multiplier developed a detailed financial monitoring and reporting system for Project Equity, which works with various funding types, including grants, client fees, fee-for-service contracts with municipalities and loan funds.

“This help was incredibly valuable and proved that Multiplier isn’t your average fiscal sponsor,” says Abell. “Many sponsors don’t handle governmental funding, which was essential to our operations. Multiplier worked with us to devise solutions that enabled us to grow.”

Multiplier worked with Lingane and Abell for almost a year on the first of two loan fund setups. The Accelerate Employee Ownership is an initiative seeded by the Quality Jobs Fund and launched in 2019 in partnership with Shared Capital Cooperative, a co-op–focused community development financial institution. It allows the partners to provide loans to transitioning employee owners, many of whom don’t have established credit or access to financing, to help them purchase the business from the exiting owner.

“We had to take a lot of moving pieces into account when building this capital program,” says Lingane. “Most fiscal sponsors would not have been able to manage the complexity. But Multiplier knew that building this infrastructure would allow us to scale, and they went above and beyond to make it happen.”

Their second loan vehicle, the Employee Ownership Catalyst Fund, launched on Labor Day 2021, is co-managed by Project Equity and Mission Driven Finance, a California Benefit Corporation.

“Multiplier’s knowledge of our goals and insight into crafting these long-term partnerships has helped guide us down a solid path to impact and also helped us minimize the need for expensive external legal counsel,” Lingane adds.

When Project Equity received a five-year big-bet grant from the Kendeda Fund in 2019, Multiplier again played a role in tailoring the funding to best support Project Equity. “We helped them think about how to best layer funding across the five-year horizon to enable them to build momentum and staff up early, including bringing in development staff to better ensure they wouldn’t hit a funding cliff at the end,” says Deaton.

That was especially helpful as Project Equity looked to expand beyond its home region in the San Francisco Bay Area. The group now serves multiple regions across the country, including Northern and Southern California, the Twin Cities, Arizona, Washington state, South Florida and Atlanta.

The win: Increasing adoption of employee ownership as a mainstream model

Since launching in 2014 and joining the Multiplier family in 2016, Project Equity has proved the feasibility of its model. The organization is now poised to begin replicating and scaling.

“Now,” says Lingane, “we’re looking to take it all a step further by engaging on a systemic level. We’re exploring ways to embed employee ownership within existing institutions like small business development centers. We’re also looking at avenues like training exit planners to advise their clients on this model. We’re excited to be in a place where we can test and learn what routes could lead to employee ownership becoming self-replicating and scalable.”

Photo by jose aljovin on Unsplash

Many of the businesses transitioning are white-owned and employ diverse workforces. When a business transitions to an employee-ownership model, Abell notes, wealth transfers to a more diverse population, addressing racial economic equity in a meaningful, concrete way.

Project Equity has already started to see this play out with its small but growing impact on businesses and workers:

  • As of June 2021, Project Equity had educated more than 6,500 stakeholders on the benefits and pathways to employee ownership and consulted with 571 businesses interested in exploring these models.
  • It has conducted 59 feasibility studies with individual businesses to determine if employee ownership is a viable option, and 14 more studies are in progress.
  • Project Equity has helped 10 businesses complete the transition to an employee-ownership model, impacting 191 workers, and it is currently working with nine other businesses whose transitions will impact an additional 204 workers.
  • It offers post-transition Thrive support to businesses with a new employee-ownership model, typically a two-year program focused on ensuring that both the company and its employee-owners flourish.

Seeking ways to advance their cause beyond themselves and the businesses they’ve helped transition so far, Project Equity is launching advocacy efforts, including a coalition called Worker-Owned Recovery California that is advocating for state funding and support for employee ownership. “This will be one of many efforts to get employee ownership on the public policy agenda in California,” says Abell. “We plan to bring new people to the table and move beyond the choir and provide a model for advocates in other states as well.”

Multiplier Acceleration

  • Created a financial monitoring and reporting system enabling trouble-free growth with a complex funding model.
  • Provided strategic advice and insights to optimally structure two loan funds and to help the project scale.
  • Supported expansion across the country and delivery of Project Equity’s high-value services.

Project Details

Project type: Startup

Focus areas: Resilient communities; sustainable, equitable economies

Duration: 2016 to present

Major funding: Historically, Project Equity’s funding has come from three major sources: Kendeda Fund (big-bet funding), Prudential Foundation and W.K. Kellogg Foundation. In 2021, Project Equity also received funds from the East Bay Community Foundation.

Sustainable Development Goals: Decent work and economic growth, reduced inequalities, no poverty

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