Business Succession Data & Resources from the University of Minnesota Extension: An Interview with Extension Specialist Michael Darger

Business Succession Data & Resources from the University of Minnesota Extension: An Interview with Extension Specialist Michael Darger Main Photo

7 Oct 2024


News, Professional & Organizational Development

The University of Minnesota Extension has conducted extensive research on succession planning and leadership transitions within the business community. Their research and resources provide economic developers with a toolkit they can use with businesses during Business Retention & Expansion (BRE) visits.

Michael Darger, a seasoned Extension Specialist at the University of Minnesota, shared this research and its recommendations with Golden Shovel in an interview for our ShovelTalk podcast. With over 21 years of experience focused on Business Retention & Expansion (BRE), Darger has recently concentrated his efforts on the critical area of Business Succession and Transition (BST). His work addresses one of the most significant challenges facing local economies: ensuring that businesses remain viable as their owners prepare to step down.

Without careful planning, communities risk losing key businesses when their owners retire or move on. Darger explains that while much of his early work revolved around Business Retention & Expansion (BRE), he has increasingly recognized the natural progression toward succession planning. “Succession is the process of preparing for what you have to transfer—whether it’s knowledge, employees, or leadership—while the transition is the legal event itself. It doesn’t have to be all or nothing. A transition can be gradual, allowing owners to ramp down over time,” Darger says.

Understanding Business Owners’ Mindsets

Darger’s research, which began under the leadership of his predecessor, Liz Templeton, delves deep into the minds of business owners. His team surveyed business owners to investigate their readiness, awareness of resources, and overall attitudes toward succession planning. Darger notes that succession planning isn’t just about finances; it’s about maintaining the business’s legacy, preserving jobs, and keeping companies within the community.

According to the survey, business owners prioritize several factors when considering a sale:

  • Business financial success after transition: 5.2 out of 6
  • Retaining good jobs for current employees: 5.1 out of 6
  • Business longevity after transition: 5.0 out of 6

Interestingly, the survey also revealed that owners often begin transition conversations with trusted individuals, such as accountants, attorneys, spouses, and other business owners. These discussions play a pivotal role in increasing their readiness for succession. “Talking to an accountant increased readiness by 0.4, while speaking with an attorney or another business owner bumped it up even further,” Darger adds.

Strategies for Economic Developers

For economic developers, engaging in succession planning conversations can help ensure that businesses remain in the community. Darger suggests identifying business owners nearing retirement as a critical first step, but he highlights a key issue: data on the age of business owners is scarce. “The age data is a black hole,” he says, underscoring the challenges that economic developers face when trying to proactively assist in succession planning.

However, once identified, Darger recommends fostering relationships with owners, offering support, and connecting them with resources like accountants, attorneys, and exit planners. “It takes a village of advisors to get people ready for a transition,” Darger explains, emphasizing the importance of collaboration among professionals to ensure a smooth transition for both the business and the owner.

The Role of Shared Ownership

Darger also explores alternative strategies for keeping businesses local, such as employee-ownership models. He references research from Rutgers that suggests shared ownership can lead to better business outcomes. “If employees have a stake in the company, they are more invested in its success,” Darger explains. Models such as Employee Stock Ownership Plans (ESOPs), worker cooperatives, and employee ownership trusts can all serve as mechanisms to keep businesses within the community and help them thrive post-transition.

University of Minnesota Succession Planning Guide & Resources

The University of Minnesota Extension offers an extensive library of resources on Business Succession and Transition. The program provides various tools, including articles, data dashboards, and videos designed to help business owners, economic developers, and communities navigate the succession process. “We want to raise awareness and help communities support business owners through this critical transition,” Darger says.
You can explore available resources, including webinars, research articles, and instructional videos, by visiting Business Succession & Transition Resources.