Employee Ownership Pathways for LA’s Microbusinesses

Income inequality

County of Los Angeles (select only if your project has a countywide benefit)

Pilot or new project, program, or initiative (testing or implementing a new idea)

Low and stagnant wages, combined with a rapidly rising cost of living, have made it nearly impossible for the hundreds of thousands of low-to-moderate income (LMI) workers in LAC to share in the success their labor creates or build generational wealth.
Simultaneously, LAC is facing a small business succession crisis. The majority of baby boomer business owners—who employ 1 in 5 private-sector workers and generate $237 billion in revenue—are nearing retirement without succession plans. Without intervention, this “Silver Tsunami” could trigger widespread business closures and significant job losses.
Employee ownership (EO) is a proven strategy to address both challenges: it helps preserve small businesses and creates meaningful ownership opportunities for workers. However, microbusinesses—those with fewer than 10 employees and under $1 million in revenue—remain largely excluded from EO transitions, despite often employing workers from some of LA’s most vulnerable communities.

With LA2050’s support, we will drive forward new strategies for expanding the benefits of EO to microbusinesses—a critical segment of LAC’s business community that has largely been excluded from EO due to limited financial and operational capacity.
There are over 25,000 Black- and Latino-owned businesses in LAC, many of which are microbusinesses and many of which employ the Black and Latino workers that comprise 48% of LAC’s workforce. Without targeted support, their owners lack succession options and their employees miss out on EO’s wealth-building potential. E.g., A 2017 study found that millennial employee-owners of color earned 30% higher wages and had 79% higher household net worth than peers at non-EO firms.
Project Equity will engage current and prospective partners—Adelante Partners, LA CDC’s BEST Mobile Accelerator, LA Coop Lab, LA County, PCR, REDF, and other entrepreneurial accelerators and incubators—to assess their ability to connect microbusinesses with technical assistance and capital. By the end of the grant period, we aim to formalize 1–2 memoranda of understanding (MOUs) with partners committed to identifying and supporting microbusinesses interested in exploring and implementing innovative EO models tailored to their needs. We will provide partners with EO education and capacity building, connections to others in the field, and–for the accelerator/incubator clients–access to capital from our EO Catalyst Fund to support business growth enabling EO readiness.

By helping microbusinesses grow, preserve jobs, and transition, partially or in full, to EO, we aim to build intergenerational wealth in communities that have long been excluded from such opportunities. If successful, our work will contribute to a thriving ecosystem of employee-owned businesses in LAC. Today, the richest 10% of Americans own 90% of business wealth, and according to the CA Budget and Policy Center, 19% of Black households and 13% of Latinx households in LAC hold no wealth whatsoever. By making one change—expanding who gets to benefit from business ownership—we can provide pathways to prosperity for thousands of LMI workers and workers of color in LAC. E.g. Since transitioning to a worker cooperative in 2021, Proof Bakery has distributed over $484,000 in patronage to its worker-owners, the majority of whom are people of color. These life-changing payouts, averaging~$15,000, have helped workers afford stable housing in a region where the cost of living continues to rise.