Community Owned Businesses

International Entrepreneurship, Finance, and Economic Development

Norman Walzer, Norman Walzer

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000391930
• Edition: 1
• Topic: Política y relaciones internacionales
• Subtopic: Planificación de ciudades y desarrollo urbano

This book analyses community-owned businesses in countries around the world to show successful approaches and important strategies to improve access to essential services in vastly different economic contexts.

Through eleven chapters, authors from various countries use case studies and analyse findings in ways which can be applied to new development initiatives, including rural grocery store retention in Kansas, socially responsible community cooperatives in Italy, preserving pubs and shops in England and Wales, serving residents with special needs in Canada, and financing basic goods and services for aging populations in Taiwan, plus other examples. The chapters explore practices and approaches used in various locations to address concerns about loss of access to essential services, making clear that this approach to financing is useful in different scenarios.

The chapters provide key insights suggesting that these approaches will be even more prevalent in the future and will be of interest to students, scholars, and community-development practitioners around the world.

1

Changing Uses of Community Supported Enterprises

Norman Walzer

Introduction

Demographic trends during the next decade will reshape the economic future especially of those nonmetro areas projected to face significant population declines as the Baby Boom Generation reaches retirement age. Almost important are changes in purchasing patterns as internet shopping with rapid delivery methods increases competition for brick and mortar stores that have been the mainstay of local economies.

The projected population aging will raise special issues as owners of small businesses reach retirement age and close their businesses. While the ventures may still be profitable, they cannot compete effectively with investment opportunities elsewhere. In the past, heirs were sometimes ready and willing to continue a family business. However, smaller family sizes and more graduates pursuing higher education mean fewer heirs in the community available or interested in continuing the businesses. The outcome will mean that some traditional services will no longer be available locally.

Evidence of these trends already exists in vacant buildings on main streets in some small towns as more residents now commute longer distances to work and shop in larger regional employment centers. While these trends have been underway for many years, residents in smaller towns now must act to preserve these communities as viable and attractive places to live. These decisions are especially important because living preferences expressed by both elderly and young adults include high quality of life, local experiences, and a walkable living environment, among other factors. Nonmetro areas often offer these attributes but will have to retain basic services to compete successfully.

Another movement underway that can help nonmetro areas is a shifting focus toward local investing and buying local. Shuman (2012; 2015) discusses the opportunities and advantages to both investors and communities when residents divert their investments from large corporations to local businesses. This growing interest in investing locally opens opportunities for community leaders to work with retiring business owners.

When faced with a potential business closing because of pending retirement, three options usually are considered. First, the owner can sell the business through a realtor or other traditional approach. Given a lower expected rate of return due to shrinking markets and competition from stores in surrounding areas, selling the business in this way may be more difficult than in the past.

A second strategy is to work with an intermediary group that helps transition businesses to new owners. Redefining Retirement (RedTire), managed by the University of Kansas School of Business, provides an electronic business-matching program where owners interested in selling a business provide basic information electronically with potential buyers. The intent is to transition these businesses to new owners and keep them in the community (University of Kansas). The university provides technical assistance to both buyers and sellers during the transition process.

In a more direct approach, Goodworks Evergreen LLC in Montana, as part of several initiatives, buys businesses and improves their profitability. It then resells them to interested parties (Goodworks Evergreen, 2020). The overall intent is to keep the businesses operating in Montana rather than have them close or relocate elsewhere. The focus is beyond small main street stores but also includes manufacturing, distribution, and service businesses with the aim to retain high-quality jobs in Montana.

A third option for local leaders facing a potential business closing involves organizing residents and creating a pool of investment funds to purchase, or reopen, the business. This approach has been used effectively around the world with several local advantages. It retains local access to essential goods and services that otherwise might be lost. Local investors also gain stronger affiliations with the community where many have grown up or lived for long periods with substantial investment in housing or other properties. Likewise, investing in the business gives them a stake in the success of the venture with an incentive to patronize it.

A related advantage is that investors and other residents have opportunities to volunteer time and efforts in a worthwhile community project. These opportunities help build social capital and strengthen quality of life in the community, which can be important in its ability to retain and attract new residents. These community-supported businesses (CSBs) have involved many types of activities with one of the most common being to maintain a local grocery store. Later discussions will show other purposes and approaches involving residents investing in local enterprises and ventures.

Social gathering places are important to the viability of small places, which generated interest in the dwindling number of community-owned pubs and shops in England (Plunkett Foundation). These ventures have now expanded to other social and health-related services which help residents overcome social isolation and loneliness that have been linked to health issues (National Institute on Aging, 2019). Continued projected population declines and growth in numbers of elderly with limited mobility will make retaining small businesses or ventures especially important not only in rural areas but also in urban neighborhoods facing losses of local establishments and institutions.

This book describes how community-supported enterprises (CSEs) and community-owned businesses (COBs) are often used as approaches to financing local efforts to retain businesses or provide services. These two terms are used interchangeably in later discussions. Common elements are that residents invest in a local venture or business with a supportive social purpose. The activity is designed to be financially sustainable without continued financial contributions from donors as in the case of a social enterprise. However, these distinctions become somewhat blurred in practice.

Community-owned or -supported businesses can operate under different legal forms including Limited Liability Corporations (LLCs), cooperatives, or nonprofits such as Social Benefit Corporations. The specific legal form usually reflects the purpose of the venture. For instance, the Hinesburgh Public House in Vermont is a Social Benefit Corporation with the goal of providing nutritious meals and quality jobs for residents in a designated area of Vermont (USA) (Hinnesburg, 2020). It also helps local nonprofit organizations with fundraising efforts by collaboratively providing meals for area residents.

In another case, a municipal government, such as St. Paul, Kansas, owns and operates a grocery store as a profit-making activity. While ownership by a municipality is less common, it may become more prevalent in the future in response to the COVID-19 economic downturn with business cutbacks and shutdowns without replacements. The CSE financing approach is sufficiently flexible to address many of these types of issues.

The importance of broad-based local support for both community and economic development practices has long been recognized in the professional literature (Macke, Markley, & Fulwider 2014; Markley, Lyons, & Macke 2015; Perodo & Chrisman, 2006). Financial investments in businesses are a natural extension of these efforts. Thus, in this book, the broad term “community-based enterprises” is used to include diverse projects that actively engage residents. This local support can vary from buying local to directly investing in the businesses as is the case with CSEs in the current discussions. Lack of commitment by residents can seriously disadvantage new business start-ups as well as negatively affect the longevity of established businesses relying on these markets. For this reason, places with active community development efforts underway are strategically positioned to launch CSEs.

Given the need for innovative financing arrangements in areas facing population declines and business closings, community-owned or -supported enterprises are becoming an important local development strategy around the world. In England, they include community-owned shops or pubs. In Canada and Italy, this financing approach is used to support social and health services. These activities are not typically owned by a public agency such as a municipality like in St. Paul. Rather, they involve direct participation by resident-investors in some way. The basic approaches vary but with several similar characteristics.

First and foremost, most such businesses are owned by local investors who, in many instances, expect no direct financial return on their investment. Instead, they use a pooled investment strategy to retain or reopen a business activity considered important to the community. The ventures are organized to be financially sustainable. The businesses must meet the requirements of any private business activity but often are advantaged by investors or residents donating time and efforts to the operations. In these cases, the venture can operate on a lower profit margin and compete more effectively than a strictly privately owned business.

Second, the ventures have a visible social purpose or mission other than simply engaging customers in marketing decisions or product development as in the case of membership clubs. Instead, organizers want to build social capital in the community and improve the quality of life by providing access to important goods and services plus engage residents in a community-wide project that enhances the future of the area. While making a profit is essential to sustainability, it is not the primary motive for the business. COBs should be differentiated from social enterprises where a not-for-profit organization pursuing a specific social cause operates a retail unit. These businesses may sell goods or services, but they can still rely on continued donations from the sponsoring organization and are not driven as much by local market conditions.

Third, COBs have a focused approach with a local champion who spearheads the endeavor. Residents who invest in the business activity usually do not engage in daily decision-making activities except in cooperative organizations where each investor has one vote. Even then, the average investor does not participate regularly in management.

Fourth, CSEs must have widespread community commitment to the project. Residents must not only be willing to invest funds and effort, but they must also be willing to patronize the business venture. This may be less true for social services, but in those cases, residents must be willing to contribute through taxes and other fees.

Purposes of Book

While CSE models are becoming more common around the world, relatively few comparisons of approaches used, outcomes achieved, or processes used are available. Walzer and Sandoval (2016) documented examples of CSEs in the US. Later, Walzer (2019) produced a guidebook to help local leaders start community-supported ventures with synopses or mini-case studies of 40 or more CSEs within the US. The Plunkett Foundation provides discussions of community-owned pubs and shops in England (Plunkett, 2019). Additional information about how CSEs start and are operated is needed to help interested community leaders evaluate whether this financing approach is well-suited for local needs.

Growth of community-owned organizations and lack of systematic comparisons or information led to the compilation of materials in this book. A call for abstracts was sent to Community Development Society and International Association of Community Development members inviting submissions of materials about experiences with CSEs and how they function. The intent is to go beyond sharing examples of successes to share what has been learned in designing and implementing these ventures. The materials illustrate a wide diversity in programs and services. The examples go beyond business ventures and include community financing for local public services.

The chapters in this book will also benefit both scholars and policymakers looking for new and innovative methods of financing ventures whether business-oriented or to provide social services during periods of declining populations and tight resources. Legal institutions and policies differ by country so a review of successes in various settings can suggest policy changes needed to promote this community financing approach.

The approaches used and described in this book have not been judged as the most effective or best by any absolute criteria. Each has a unique purpose and intended outcome(s). Their value is to illustrate activities that have worked and are effective for different purposes under various settings. In some cases, the approaches are not directly transferable, but potential users can learn from the processes and can adjust them to new locations. Perhaps, most important is to see the diversity of applications where they have succeeded.

Subsequent discussions are presented in two major sections. The first set of chapters focus on the importance of local investments in business ventures and the supportive environment needed. Authors discuss examples where local groups launched an initiative to organize an investment pool to start or continue ventures and activities they see as essential to the social and economic viability of the community. The strategies range from social benefit corporations to social cooperatives, depending on legal institutions and requirements.

Later chapters address ways in which community-supported financing approaches have been extended or broadened to include social or public types of services with examples from Italy, Canada, and Taiwan following the 2008 recession. These approaches will probably become even more prevalent as ways to rebuild lost social infrastructure in the post-COVID-19 recession period that is adversely affecting the financing of local services.

At the center of the community-owned approach is the interest and willingness of residents to divert investments from larger corporations to on-going local business activities. Shuman (Chapter 2) argues that the perceived risks involved with small business discourage residents from investing in small local businesses, and instead, they invest in large corporations. On closer examination, the reputation of high risk with small businesses relates more to business starts than size. Local stores or outlets about to close due to retirements may have operated profitably for decades, but the operations will discontinue due to lack of financial support. Some would continue if local investment funds were available.

Crowdfunding approaches to financing proje...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of Figures and Tables
• Notes on Contributors
• Acknowledgements
• 1 Changing Uses of Community Supported Enterprises
• 2 Financial CSEs: Lessons from North America
• 3 Creating a Supportive Environment for Community Enterprises
• 4 Community-Owned Pubs in Great Britain: Hubs of Community Enterprise
• 5 Core Community Capitals and Impact on Successful Community Development
• 6 St. Paul, Kansas’ City-Owned Grocery Store: A Variation of the Community Supported Enterprise Approach
• 7 Community Engagement or Community Service? Case Study of Italian Community Co-Operatives and Networks
• 8 Taiwan Community-Based Enterprise as Development Strategy toward Community Capacity Building
• 9 Community-Led Crowdfunding Fosters Rural Prosperity and Resiliency
• 10 Social Enterprise, IDD, and Community-Supported Enterprises in Ontario, Canada
• 11 Applications of CSE Principles
• Index