Second- and third-generation businesses can face mounting and unforeseen challenges. Historically speaking, as many as 70% of legacy family businesses often don't survive past the second generation.
Local businesses that took years, or even decades, to build are an integral part of their neighborhoods, embodying the entrepreneurial spirit the nation was built upon. These small family businesses often have far fewer resources and less ability to pivot in response to economic challenges, putting their longevity in jeopardy.
This makes it more critical than ever for American communities, especially at the state and local level, to provide the next generation with the tools and support needed to carry small businesses into the future and ride the wave of the Silver Tsunami.
How state investments make an impact
States can help family business entrepreneurs and their heirs navigate the succession journey into the next generation with financial support through grants and loans, as well as by providing vital resources, information and mentoring to help them grow. States already invest millions of dollars toward technical assistance, capital investments and loans to aid small businesses, but the need is still great. State investments that are planned and managed smartly can contribute to the resiliency of these businesses, strengthening their communities and helping ensure they can thrive for many years to come.
For example, the Michigan Economic Development Corporation (MEDC), along with local economic development partners and Michigan's network of Small Business Development Centers (SBDC), helps small business owners connect to the right support at pivotal moments, such as financial support, key information, assistance and helpful resources, whether they're just starting out or ready to transition to the next generation.
"By supporting entrepreneurs who choose to build on Main Street, the state of Michigan offers a model that other states in the country can follow," said Amy Rencher, senior vice president of Small Business and Talent at the MEDC. "These programs help neighborhood businesses strengthen the connective tissue between local identity and statewide growth, benefitting communities and leading the way to a stronger future with each new generation."
An instrumental success story
Stan Werbin and Sharon Burton were fresh out of graduate school when they started the nationally and internationally recognized Elderly Instruments in Lansing, Michigan. The business was born from their love of vintage acoustic fretted instruments, which they were already collecting and trading for fun. The business grew quickly through the 1980s and '90s, becoming more than a retail store: a hub for repairing, appreciating and celebrating musical instruments and musicians.
Heading into the second generation, Stan's daughter Lillian Werbin drew on her education in public relations as she learned the business from the ground up. After meticulously studying the business's sales, marketing and shipping operations, Lillian grew into the role of CEO and co-owner as her father began stepping back from leadership.
For the past decade, Lillian has worked to modernize the business while maintaining the warmth and service Elderly Instruments is known for. The challenge was, how could she afford to make necessary improvements to the showroom and enhance the customer experience in order to keep the business thriving in an increasingly competitive retail environment?
Looking to fulfill these goals, Lillian sought support from the MEDC, earning a 2022 Match on Main grant that has been instrumental in the ongoing growth and success of Elderly Instruments. Match on Main is part of MEDC's broader community development efforts to support vibrant, resilient, inclusive downtowns and commercial districts across Michigan. The program provides reimbursement-based grant funding of up to $25,000 per project to support new and expanding place-based small businesses. A total of $5.9 million of funding has been contributed since 2019. The result? Ninety-one percent of the small businesses are still in business after benefiting from the program and an average of $58,200 in annual revenue increases per awarded business.
Since receiving a Match on Main grant, Elderly Instruments continues to thrive, recognized as America's Top Small Business by the U.S. Chamber of Commerce in 2023, and one of the 2024 Michigan 50 Companies to Watch by Michigan Celebrates Small Business. As a second-generation business owner, Lillian aims to honor her father's legacy, appreciated by musicians and music lovers in Michigan, across the U.S. and even worldwide.
"It's important for me to preserve what people feel when they come to Elderly. This should be a people's music store," said Lillian. "This is a family business and a community business. It's important to be able to preserve that legacy."
