CARI: Center for Applied Rural Innovation

 

Title

Business Transfer and Retention in Rural Nebraska

Document Type

Article

Date of this Version

July 2002

Comments

Published by the Center for Applied Rural Innovation, University of Nebraska - Lincoln. Copyright © 2002 by J. Allen, R. Vogt, S. Cordes, R. Cantrell. Used by permission.

Small businesses are an important part of the economic future of rural Nebraska. Therefore, it is important for communities to be able to retain their existing businesses. Part of retaining businesses involves transferring ownership of current businesses to the next generation. How important is transferring ownership of businesses in their community to rural Nebraskans? Which strategies do they think would be most effective in retaining businesses? What do rural Nebraskans who currently own a business, farm or ranch believe will happen to it after they are no longer involved in its operation?

This report details 2,841 responses to the 2002 Nebraska Rural Poll, the seventh annual effort to understand rural Nebraskans’ perceptions. Respondents were asked a series of questions about business retention and transfer strategies. Comparisons are made among different respondent subgroups, i.e., comparisons by age, occupation, region, etc. Based on these analyses, some key findings emerged:

• Most rural Nebraskans view assisting people to take over local businesses and farms as important to the future of their community. Ninety-two percent think assisting people to take over local businesses as current owners retire is very or somewhat important for the future of their community. Similarly, 90 percent view the transfer of local farms as important.

• Persons living in or near smaller communities are more likely than those living in or near the largest communities to think transferring ownership of businesses is very important. Sixty-one percent of the persons living in or near communities with populations ranging from 500 to 999 think this is very important for the future of their community. However, only 47 percent of the persons living in or near communities with populations of 10,000 or more agree.

• Forty-one percent of the employed respondents own either a business or farm/ranch. Twenty-one percent own a farm or ranch, 13 percent own a business and seven percent own both a farm or ranch and another type of business. Fifty-nine percent do not own either.

• Many rural Nebraskans are involved in multiple enterprises. Only 51 percent of the farm and ranch owners indicate that their primary occupation is farming or ranching. And, fourteen percent of the farmers or ranchers indicate that they also own some other type of business.

• Persons owning a farm or ranch are more likely than those owning only a business to say it will stay in their family. Forty-one percent of the persons owning only a farm or ranch state that it will stay in their family. However, only 14 percent of the persons owning only a business believe it will stay in their family.

• Business owners living in or near communities with populations ranging from 5,000 to 9,999 are the most likely to say their business will be sold and closed down. Thirty-five percent of the business owners living in communities of this size say their business will be sold and closed down when they are no longer involved in its operation. In comparison, 28 percent of the business owners living in communities with populations of 10,000 or more say their business will be shut down.

• The farm or ranch owners living in the South Central region of the state are more likely than those living in other regions to say their farm or ranch will stay in their family. Fifty-one percent of the farm or ranch owners in the South Central region state that their farm or ranch will stay in their family. However, only 24 percent of the farm or ranch owners in the Panhandle say their operation will stay in their family.

• The business owners in the North Central region are more likely than the business owners in other regions of the state to say their business will be sold and closed down. Forty percent of the business owners in the North Central region say their business will be sold and closed down when they are no longer involved in its operation. However, only 18 percent of the business owners in the Panhandle say their business will share this same fate.

• The business retention strategies ranked the highest by rural Nebraskans in terms of their effectiveness include: creating a mentoring program for youth who are interested in becoming business owners, creating a program where people can save money that is matched with federal or other public dollars to use to start a small business, and enhancing the ability of businesses to use information technology.

• The perceived effectiveness of several of the business retention strategies varied by community size. Providing entrepreneurial or business training to the youth in their community and educating business owners on how to develop a business plan that includes a transition plan for the business were more likely to be ranked highly by the persons living in or near the larger communities as compared to persons living in the smaller communities. Conversely, creating a revolving loan fund to be used to make loans to local businesses and creating a tax credit to use toward the development of new or existing buildings or other development costs ranked higher among the persons living in or near smaller communities than by those living in or near larger communities.