Testing Community Ownership at Scale

Dr. Heather Hachigian and community partner Scale Collaborative used Vancouver Foundation funding to investigate the feasibility of a model for non-profits and communities to acquire strategic community businesses.

Local “main street” businesses are a critical part of community infrastructure throughout BC and being lost at an alarming rate. In 2018, it was estimated that over 700,000 Canadian small businesses risked closing within 10 years due to demographic ageing and structural issues in the market. The pandemic and digitization of the economy are accelerating this hollowing out of local, community businesses.

Retiring or tired owners are often unable to find local buyers and face the hard choice of closing or selling at a discount to large, distant buyers. Research tells us this drains wealth from communities, with significant and detrimental impacts on local employment, local control of assets, and provision of critical goods and services.

The non-profit sector is often left to fill gaps, generating employment, providing goods and services and fostering community connection. But years of short-term and project-based funding have left non-profits vulnerable, and the pandemic is exacerbating these challenges. More non-profits are looking to social enterprise as a response, but this is often a risky path. The prevailing approach has been to launch new enterprises, which often take years to realize financial returns and have higher failure rates versus acquiring an operating business.

The research team saw the potential for a scalable approach to address this confluence of challenges, maintaining critical local businesses while growing an empowered non-profit sector. Many successful social enterprise models share characteristics with thousands of succession-ready local businesses such as cafes and landscaping, catering, cleaning and construction services. These businesses often create decent, flexible employment with adequate margins, build community connection, and are unlikely to be replaced in a digital economy.

What if non-profits and communities could acquire and convert businesses with strategic community value into social enterprises, at scale? Our research and experience suggest this could be a transformative model for the local economy, and that the time is ripe to test. Despite its potential, this acquisition pathway is rarely contemplated. The parts of this system that we believe hold the barriers to community acquisitions and wealth building in place include:

• lack of awareness of non-profit acquisition as an option
• lack of capacity to source, acquire & operate existing enterprise
• culture of risk intolerance & discomfort for blending small business and non-profits
• legal systems that prioritize private over community ownership
• lack of financing tools to assist non-profits to acquire & operate enterprises
• lack of policy framework that supports transfer of assets for community wealth

This project tested a new model to shift succession-ready small businesses to communities that have a direct stake in their continued operation, manage these acquisitions at scale through a trust or holding company and redistribute profits back to communities.