In the next 10 years, L3 estimates that over 700,000 small businesses in Canada will face an ownership exit. Even before the pandemic, many businesses were at risk of closure because they lacked an adequate plan for their succession (CFIB, 2018). These transitions will be even more difficult and uncertain when considering the impacts of the global coronavirus pandemic.
Small businesses are vital to a sustainable and resilient community. They provide local jobs, services, and products. The money they generate can also be fed directly back into the community. As the impacts of COVID-19 grow, many small businesses will be forced to close if they cannot implement an effective succession plan. When these businesses close, it affects not only the owner but also the employees and community in which it operates.
The Legacy Leadership Lab (L3) believes that social acquisitions are the solution to this problem. A social acquisition occurs when a traditional business is bought and re-aligns its mission to create some social, cultural, or environmental benefit while maintaining its revenue-generating ability. These new mission-focused businesses are also called social enterprises. The L3 team is working to support the network of stakeholders that can carry out social acquisitions, building the conditions to allow for their widespread application. Social acquisitions will not only provide succession options for small businesses, but they will support the creation of new social purpose enterprises that will help enable a just and sustainable COVID-19 recovery in Canada.
While the use of social acquisition as a succession and recovery option is still rare, there are some great examples of social acquisitions that have generated environmental benefits. Fernwood NRG is a community organization in Victoria, BC, that supports local services such as childcare, community gardens, and affordable housing (Fernwood NRG, 2018). A local salon was set to close due to the owner’s retirement. Fernwood NRG purchased the business which not only secured the local jobs and salon services but also generated revenue for the organization to improve their other community programs. To keep with Fernwood NRG’s commitment to environmental sustainability, the salon also transitioned to zero-waste operates (Fernwood, n.d.).
There are other great examples of social enterprises in Canada. Solar Share is one of Canada’s leading renewable energy co-ops, that allows anyone to purchase bonds for as little as $1000 (Solar Share, n.d.). This investment feeds into the solar projects that they develop across the country and have already generated $5 million in returns. Firebird Community Cycle operates in Barrie, ON, that repairs and recycles bicycles (SEOntaario, n.d.). Their mission is focused on partnering with community members to make cycling more accessible.
L3 sees an opportunity for social acquisitions to tackle the issue of small business succession, but they can also help create a sustainable and just COVID-19 recovery. Social acquisitions can create the widespread development of social enterprises that focus on achieving environmental benefits while maintaining their financial resilience. There is so much room to grow back better and L3 is supporting the next generation of business stakeholders to take on this challenge.
About the author
Will Volpe completed a summer co-op term with L3 in 2020. He is studying Planning at the University of Waterloo and is pursuing a diploma in Environmental Assessment. His main interests are focused on how to create resilient communities through sustainable economic development. Before joining the L3 team, Will worked at Ontario Parks as a Park Planner where he worked on management planning and environmental assessment. He has also worked for the City of Brampton as an Environmental Planner where he focused on community engagement and natural heritage protection.
About Legacy Leadership Lab (L3)
L3 is an 18-month initiative by the Waterloo Institute for Social Innovation and Resilience, funded by the Government of Canada’s Investment Readiness program. We are leading online workshops and events to help build expert-driven solutions for Canada’s transitioning small business community. The L3 Community is developing and activating market interventions and prototypes that allow conventional and social finance players, business service providers, and community leaders to facilitate social acquisitions of existing businesses in their own towns and contexts.
About Waterloo Institute for Social Innovation and Resilience (WISIR)
WISIR is a research institute at the University of Waterloo’s School of Environment, Enterprise and Development committed to generating trans- and inter-disciplinary knowledge about social innovations and the social innovation process (the dynamics of learning, adaptation and resilience). Our approach is to pursue collaborative research and projects that bridge University of Waterloo departments, involve researchers from around the world, and engage those beyond academia. We seek to mobilize this knowledge through a range of new curriculum offerings and training opportunities - both within and outside of a university setting.
References
CFIB. (2018). Getting the Transition Right. Retrieved from: https://www.cfib-fcei.ca/en/research-economic-analysis/getting-transition-right
Fernwood NRG. (2018). Reflecting on social enterprise. Retrieved from: https://fernwoodnrg.ca/reflecting-on-social-enterprise/
Fernwood NRG. (n.d.). Studio 1313 Hair Design. Retrieved from: https://fernwoodnrg.ca/neighbourhood/studio-1313-hair-design/
Solar Share. (n.d.). About Us. Retrieved from: https://www.solarbonds.ca/about/about-us