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Case Study: Community leaders collaborate to support business succession

Fairmont, Minnesota (pop. 10,000)

Background

When Fairmont Economic Development Authority (EDA) staff saw a number of businesses liquidating inventory, selling buildings, and closing to retire, they knew they needed to act. A lack of succession planning was a common factor for many closures. At the same time, prospective buyers had contacted the city seeking information about businesses for sale. Business owners and potential buyers, however, seemed disconnected from each other. Seeing this as an opportunity, the Fairmont EDA decided to support successful business transitions as an economic development strategy.

Fairmont EDA leaders knew several organizations could help address business succession. The city engaged the local chamber of commerce, Fairmont Recreation and Community Education, University of Minnesota Extension, and the region’s Small Business Development Center (SBDC) to design a program that addressed business succession and transition. The program received a $20,000 grant from the Southern Minnesota Initiative Foundation and launched in 2022.

Goal

The overarching objective of the program was to enhance the long-term survival of local small businesses to create a prosperous future for the community. Small businesses are the lifeblood of local economies and more than half of all U.S. business owners are aged 55+. Fairmont sought to ensure these businesses successfully transition to new leadership or ownership through the program.

The program had three goals:

  1. Create awareness of the importance of succession planning for both business owners and the community.

  2. Engage businesses in taking active steps to plan for succession.

  3. Help prospective entrepreneurs and business buyers understand the tools and resources available.

Program design and implementation

To achieve these goals, the team planned activities designed to raise awareness about the importance of succession planning, provide resources, tools, and motivation for current owners to start planning, and help potential new owners build the knowledge and skills needed to buy a business. Two key activities were undertaken to achieve the goals: an information session and a hands-on educational program.

Information session

To raise awareness of the issue, the program launched with two information sessions. The sessions were free and open to the public. University of Minnesota Extension staff provided an introduction to the basics of business succession and transition and featured a panel discussion with local firms that shared successful transition experiences. The educational program on business succession and transition was promoted at these open information sessions.

Educational program

To provide resources, tools, and motivation for current owners to start planning, and to help potential new owners build the knowledge and skills needed to buy a business, the team designed a hands-on educational program. The educational program offered two tracks; one for entrepreneurs who may want to buy a business and one for business owners wanting to prepare for a future sale. Each track met for 1.5-2 hours in the evening once per week for three weeks.

Topics for the business owners included:

  • Assessing your personal and business goals.
  • Preparing the business for sale.
  • Identifying transition support team members (e.g., legal, banking, accounting, SBDC), and business valuation.
  • Navigating buyer selection and the sale process.

Topics for the entrepreneurs and prospective buyers included:

  • Understanding motivations and fit for business ownership.
  • Identifying a deal team to support a purchase (e.g., legal, banking, accounting, SBDC).
  • Navigating the buying process, including due diligence, business planning, and letter of intent.

Program promotion

The information session and educational program were offered through Fairmont Community Education and Recreation and promoted by community education, the Chamber of Commerce, and the Economic Development Authority.

Price to participate

There was a small fee to participate in the program ($50 to $100, depending on whether they were a business seller or a purchaser; chamber members also received a $10 discount).

Roles

The Fairmont Economic Development Authority worked with regional partners to design and deliver the program. These partners included the Fairmont Area Chamber of Commerce, Fairmont Community Education and Recreation, South Central Small Business Development Center, University of Minnesota Extension, and several private businesses. The team collaborated on the design and execution of the program with each organization contributing based on their capacity and capabilities.

  • Economic Development Authority: Served as the fiscal host and sponsor of the program. Recruited individual businesses for the launch event as both participants and panelists.
  • Fairmont Area Chamber of Commerce: Chamber president hosted the launch and educational sessions and recruited individual businesses for the launch event as both participants and panelists. The Chamber also helped promote the program to their membership.
  • Fairmont Community Education and Recreation: Hosted registration and promoted the program via its existing communication channels to both current business owners and entrepreneurs.
  • South Central Small Business Development Center at Minnesota State University Mankato: Led the creation and deployment of the curriculum for both tracks. Participated in the launch event. Provided ongoing support and counseling for businesses and entrepreneurs who participated.
  • University of Minnesota Extension: Regional Extension Educator served on the program development team, shared models used by other communities, and provided educational content for the launch sessions.
  • Southern Minnesota Initiative Foundation: Provided the City of Fairmont with a $20,000 grant for the initiative.

Outcomes

Fourteen businesses participated in the information sessions. Three businesses and four entrepreneurs participated in the educational program. In the months following the program, eight businesses that participated in either activity were actively pursuing transition activities due to program activities.

Insights

  • While the launch event was meant to raise awareness, it also served as a catalyst for some businesses to pursue succession work, even if they didn’t participate in the more in-depth education program.
  • Leveraging the strengths of multiple organizations streamlined the implementation of the program.

Tips for other communities

With business owner retirements expected to continue into the next decade, succession and transition is a critical economic development issue for communities. Fairmont’s efforts offer a good example for others. Communities that also want to take action can:

  • Coordinate with community members who share an interest in supporting business succession and transition. Think outside of the box when considering who might be a partner for this work.
  • Invest in education, skill building, and social connection.
  • Budget accordingly. Consider the cost to engage instructors, promotional activities, facility needs, and printing.

Authors: Jennifer Hawkins, Extension educator;  Michael Darger, Extension business retention and expansion program lead

Reviewed in 2022

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