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About two years ago, Wallace Meyer, director of entrepreneurship programs at the University of Kansas Business School, was having dinner with a group of economic development officers in Goodland, a rural Kansas city about a seven-hour drive from the university. He asked them what the most pressing problem facing their communities was, and the answer was unanimous: Too many owners of small businesses in rural communities were unable to sell or find a successor for their businesses, a problem exacerbated as many baby boomers reach retirement age.
On the long drive back home to Lawrence, Meyer spent the next few hours pondering if there was a way he could help small businesses in these communities stay afloat.
“Given the distance between Goodland and Lawrence, I had plenty of time to think about a solution on the way home,” he says.
By the time he pulled into his driveway, he’d come up with an idea he believed would have the power to change the direction of rural economic development in the state and create new, lucrative job opportunities for many of the school’s recent graduates. His idea has since moved from concept to reality. On July 1, the business school launched a program that allows retiring business owners to sell their businesses to a team of qualified graduates from universities in Kansas. The business school will essentially serve as a “matchmaker” between the two parties, Meyer says, helping the existing business owner find the right team of people to take over the operation and making sure the new business owners are qualified and ready to take on the challenge of running a business in a rural community.
Kansas has 13,500 businesses whose owners plan to retire in five years but who don’t have succession plans in place, Meyer notes. The program aims to attract applications from a pool of about 4,000 of those businesses, those with annual revenue of at least $750,000, he says.
To make the program more enticing to MBA graduates and those who might otherwise not have the funds to buy the business outright, the school has teamed up with the U.S. Department of Agriculture’s Kansas office, which will be offering potential new business owners a chance to participate in a loan guarantee program. Students and alumni will need to come up with only 10 percent to 20 percent of the financing, says Meyer, with local banks providing the rest.
“Relatively soon after graduation, students will have the opportunity to run their own business,” he says. “That is a huge opportunity for them.”
To ensure that the program has a high success rate, Meyer says a board of advisers made up of leading businessmen and entrepreneurs in the state will provide the existing owners and the new owners with guidance and counseling during the transition. The business school will also require that retiring business owners mentor the new owners and management team for up to three years, says Meyer. The goal, he says, is for the new owners to expand the business and ultimately employ more Kansans in rural areas.
Brian Depew, the assistant executive director and director of policy and outreach at the Center for Rural Affairs, a national rural advocacy and development organization in Lyons, Neb., says the program is similar to one run by his organization for the past 30 years called Land Link, which matches beginning farmers with established landowners and assists them with retirement planning and new farm financing. The University of Kansas program has the ability to affect dozens of different types of business in the state, potentially on a larger scale, he says.
“Both with retiring farmers and small business owners, they sort of have poured their whole life into creating the business, and they haven’t always prioritized setting up a succession plan,” says Depew. “I commend them, because this is a real challenge for rural communities in the Midwest and the Great Plains.”
So far the University of Kansas program has met with a warm reception from the state’s small business community. The program has already received about three dozen inquiries from businesses interested in participating, including pharmacies, financial institutions, agricultural support businesses, and health clinics, Meyer says. “We are off to the races.”
The program will be in a beta phase initially, with plans to do two or three deals in the first year of the program, eventually scaling up to dozens more. Business students will help evaluate applications and work with the program’s staff to write a booklet that explains how to replicate the concept at other universities in the country.
Says Meyer: “If it works in Kansas, there’s no reason it couldn’t work in 49 other states.”