As many as 10,000 jobs are at risk of disappearing in rural Montana over the next five years because small business owners are nearing retirement and there’s nobody willing to buy their companies and keep workers employed.
“When a little town like Circle loses a manufacturing company with three to four employees, that’s never coming back,” said Wayne Gardella, the Montana district director for the U.S. Small Business Administration.
The projections are so alarming that Gardella’s office has teamed up with the Governer’s Office of Economic Development and the Montana Manufacturing Extension Center to try to find solutions.
“We want to reach out to them three or four years before they’re thinking about selling so that they can have all their information, (such as their appraisals and net profits), ready to go for an interested buyer,” Gardella said.
He was speaking at an event called Invest Montana, a roundtable discussion and presentation by Montana Securities Commissioner Matt Rosendale, on Tuesday at the Stockman Bank building in Missoula. The statewide tour is the commissioner’s initiative to encourage business investment and highlight capital formation throughout the state. It also aims to educate Montanans on the ways the state’s securities laws allow organizations, companies and local governments to raise funding from investors.
“The purpose of the capital formation presentations and roundtable discussions is to create a dialogue with business leaders, economic development organizations, business incubators, and community leaders to promote investment in Montana and support businesses as they start up and/or grow their existing operations,” Rosendale said.
Gardella spoke about how the Small Business Administration tries to help entrepreneurs by getting access to loans and having business plans. He wants to call attention to the fact that small business owners in rural Montana are aging and there aren’t a lot of young people waiting to step in and keep the business going.
“There’s a lot of businesses with owners who just want out,” Gardella explained. “But it’s challenging to find buyers. We could lose 10,000 manufacturing jobs in rural areas.”
There are 56 counties in Montana, but from 2000-2016, just five counties with larger urban centers have captured 75 percent of new jobs, according to data from the U.S. Bureau of Economic Analysis. Gardella said urban centers like Missoula are rapidly expanding job growth, but that's not the case for woodshops in places like Ekalaka where the older generation is heading for retirement.
Gardella has plenty examples of business owners not having enough facts about their own business before they decide to sell. He remembers one small resort owner who thought their liquor license would be worth $350,000 to a potential buyer.
“Well, I called the top lawyer in the state who deals with those, and I asked him how much he thought a liquor license would be worth in that area,” Gardella recalled. “The guy told me he had just closed on one last week in that area for $35,000. So I always tell people to have their assets appraised before they go to sell so they know what it’s worth.”
Many times, older business owners have a lot of the company’s assets sunk into nice equipment like trucks, but that means the company doesn’t show a profit. There are many ways that a small business owner can make their business attractive to a potential buyer with a little planning, Gardella said.
“We hope that they reach out to us,” he said.
Lynne Egan, the state's deputy securities commissioner, said that Montana is one of the top state's in the nation for businesses that raise money through online crowdfunding.
"It allows people to take pride and ownership in the community," she said. Everything from a distillery to an edible cricket farm to a purse manufacturing company has been crowdfunded here, she said, and a Montana business can raise up to $1 million a year for an annual $50 fee as long as you're not a convicted felon. There are disclosure documents that you have to fill out, so investors know what they're getting into, of course. Egan also said people need to do their homework and be vigilant about scammers.
“We have talented people, great businesses, and an unparalleled entrepreneurial spirit in Montana," Rosendale concluded. "By raising capital, Montanans can leverage those assets to start new businesses, expand existing ones, and create more good-paying jobs in Missoula and every other community under the Big Sky."
For more information about ways to get access to capital outside of traditional lending organizations, visit http://csimt.gov/invest-in-montana/.