[Senate Hearing 118-382] [From the U.S. Government Publishing Office] S. Hrg. 118-382 SUCCESSION PLANNING: OPPORTUNITIES TO BUILD WEALTH AND KEEP JOBS IN LOCAL COMMUNITIES ======================================================================= HEARING BEFORE THEW COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP OF THE UNITED STATES SENATE ONE HUNDRED EIGHTEENTH CONGRESS SECOND SESSION __________ JANUARY 24, 2024 __________ Printed for the use of the Committee on Small Business and Entrepreneurship [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 56-455 WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ONE HUNDRED EIGHTEENTH CONGRESS ---------- JEANNE SHAHEEN, New Hampshire, Chair JONI ERNST, Iowa, Ranking Member MARIA CANTWELL, Washington MARCO RUBIO, Florida BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho EDWARD J. MARKEY, Massachusetts RAND PAUL, Kentucky CORY A. BOOKER, New Jersey TIM SCOTT, South Carolina CHRISTOPHER A. COONS, Delaware TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois JOSH HAWLEY, Missouri JOHN W. HICKENLOOPER, Colorado TED BUDD, North Carolina Sean Moore, Democratic Staff Director Meredith West, Republican Staff Director C O N T E N T S ---------- OPENING STATEMENTS Page Jeanne Shaheen, U.S. Senator from New Hampshire.................. 1 Joni Ernst, U.S. Senator from Iowa............................... 2 WITNESSES Mr. Scott Snider, President, Exit Planning Institute, Westlake, OH............................................................. 4 Prepared Statement........................................... 7 Ms. Theresa Hildreth, Executive Director, Calhoun County Economic Development Corporation, Rockwell City, IA..................... 9 Prepared Statement........................................... 11 Ms. Tabitha Croscut, Shareholder, Devine, Millimet and Branch, P.A., Manchester, NH........................................... 16 Prepared Statement........................................... 18 Mr. Palmer Schoening, Chairman, Family Business Coalition, Washington, D.C................................................ 26 Prepared Statement........................................... 28 ADDITIONAL LETTERS/STATEMENTS FOR THE RECORD Small Business Investor Alliance Statement dated January 24, 2024............................. 48 White, LaTanya Statement dated January 24, 2024............................. 52 SUCCESSION PLANNING: OPPORTUNITIES TO BUILD WEALTH AND KEEP JOBS IN LOCAL COMMUNITIES ---------- WEDNESDAY, JANUARY 24, 2024 United States Senate, Committee on Small Business and Entrepreneurship, Washington, DC. The Committee met, pursuant to notice, at 2:15 p.m., in Room SR-428A, Russell Senate Office Building, Hon. Jeanne Shaheen, Chair of the Committee, presiding. Present: Senators Shaheen [presiding], Cardin, Rosen, Hickenlooper, Ernst, Young, and Hawley. OPENING STATEMENT OF SENATOR SHAHEEN Chair Shaheen. Well, good afternoon, and thank you all for your patience. If it is Wednesday afternoon, we have got to be in the middle of votes, so we have had one vote, and we will have another one in probably the next 30 or 40 minutes. So I assume at that point, we will take turns and try and go out and vote but not disrupt the hearing. So again, thank you all. The Senate Committee on Small Business and Entrepreneurship will come to order. It is really wonderful to have you all joining us today to talk about something that is really a challenging issue for so many small businesses. We will be introducing our witnesses, but before we do that, we are going to have opening statements by myself as Chair and the Ranking Member, Senator Ernst. Every day, more than 10,000 baby boomers turn 65. In my State of New Hampshire, our aging population outpaces the rest of the country. We are in a phenomenon that is referred to as the silver tsunami that is going to affect our country's small business ecosystem and local economies. Nationwide, more than half of all private employer businesses are owned by individuals over the age of 55. They employ more than 32 million Americans and receive $6-and-a-half trillion in revenue a year. Failing to properly transition these firms means that local communities will lose businesses that have been in neighborhoods for generations. It will put at risk countless jobs and literally trillions of dollars in assets. Unfortunately, most small business owners are ill-prepared to exit their businesses. They have dedicated most of their time in business to building a successful company, and they do not have the information or resources to think about next steps. It is something that I see in my own family, where we have a number of family members who are looking at the next generation of taking over, and, in some cases, there isn't anybody to take over, so how to deal with that succession is a real challenge. According to a 2023 survey, about 80 percent of small business owners did not have a formal succession plan before putting their businesses on the market, and among those that did, most engaged in planning for less than a year before getting to a sale. This hearing is an opportunity to think about how we help those small business owners transition their businesses. How do we help them retain the legacy of those family businesses? How do we help them save for retirement and ensure that jobs remain in local communities? So again, we are delighted to have you all join us today, and I look forward to your statements. And I will now turn it over to Senator Ernst. STATEMENT OF SENATOR ERNST Senator Ernst. Great. Thank you. Good afternoon, and thank you, Chair Shaheen, and to all of our witnesses for being here today. I also want to give a special thank you to my fellow Iowan, Ms. Theresa Hildreth, who is the executive director of the Calhoun County Economic Development Corporation, for coming to Washington to share your insights with us. Thank you, Theresa. Small businesses are key drivers of local enterprise and community life. These hardworking and dedicated small business owners pour their lives into building their companies. For many entrepreneurs, succession planning is a way to plan for retirement and ensure their business and legacy continues to thrive. According to Guidant Financial, nearly 40 percent of small businesses are owned by older folks who may soon be looking to retire and start their life's next chapter. So the phrase that you used, Senator, ``the silver tsunami''--maybe in Iowa it is the silver cyclone, I am thinking. [Laughter.] Senator Ernst. For our family-owned businesses, especially farms and other rural small businesses, succession planning is deeply personal. It is more than a conversation about family finances or selling a business to the highest bidder. It is a process that must consider the business' role in their community. According to the National Federation of Independent Business, nearly one-third of business owners plan to pass their business to a family member. Despite often being tent poles of families and communities, small business owners can face significant challenges in keeping their business' operations going from one generation to the next. The complex, burdensome process can require expensive attorneys, accountants, and business advisors. Navigating the red tape discourages folks. Making, selling off, or shutting down their enterprise is less of a headache than keeping it open or passing it on to their family. The death tax is a major burden during succession planning, especially for farmers. I was proud to support the Tax Cuts and Jobs Act, which eased the burden on small businesses by nearly doubling the death tax exemption and adjusting it for inflation. Unfortunately, this provision expires in 2025. If we let it lapse, it will heap even more burdens on hardworking entrepreneurs, not to mention create a great deal of uncertainty for small business owners who are looking to retire in the coming years. Meanwhile, Bidenomics continues to punish Main Street. Rising prices, high interest rates, and skyrocketing operating costs are pushing small business owners to delay succession planning. However, my home State of Iowa continues to lead the charge to even the playing field for small business owners. At the State level, Governor Reynolds and the legislature phased out the inheritance tax, another reason folks choose to move to Iowa to live and work. On the Federal level, I have long supported repealing the death tax altogether. I am proud of my friend and colleague from Iowa, Congressman Randy Feenstra, who is leading the charge in the House. It has long past time to end the practice of death being a taxable event. Are Americans not taxed enough while they are alive? Do we really need to penalize family members who are grieving their loved ones? Small business succession planning should be easy to understand, easy to navigate, and easy to do. A locally-led approach informed by the owner's priorities and vision must be the standard. Ensuring small business owners are in control and well informed is critical to the well-being of the communities they serve. As we start to hear from our witnesses, I am looking forward to learning how this Committee can better help small business owners navigate business succession planning. Thanks to all of our witnesses, and thank you, Chair Shaheen, for delving into this important topic. Chairwoman Shaheen. Well, thank you very much, Senator Ernst, and, again, I want to welcome our witnesses. I will begin by introducing Scott Snider, who is the president of the Exit Planning Institute, EPI. EPI focuses on improving succession planning outcomes for small to mid-sized companies, including through certifying exit planning advisors. I understand you also conduct surveys, and you are going to have one that is coming out in March that will give us some very interesting information, so we hope you will share that with the Committee when it is finished. Mr. Snider is also passionate about guiding small business owners in their succession planning journey, having been an entrepreneur himself with firsthand experience in transitioning from his own business, so I am looking forward to hearing your testimony. I am also delighted to welcome from Manchester, New Hampshire, Tabitha Croscut, who is a shareholder and attorney at Devine-Millimet & Branch in Manchester. Tabitha has a national legal practice focused on utilizing employee stock ownership plans, or ESOPs, as a succession plan. She has been practicing in that area for more than 20 years. Ms. Croscut also sits on the boards of numerous ESOP organizations and frequently speaks out about those transactions at conferences and seminars. So we are delighted to have your expertise from New Hampshire, and I am also pleased to turn it over to the Ranking Member to welcome the other two witnesses. Senator Ernst. Great. Thank you very much, and welcome, Mr. Snider and Ms. Croscut. Thank you for joining us as well. I know--I now have the pleasure of introducing the rest of our witnesses who are testifying today, including my fellow Iowan, Ms. Theresa Hildreth. Ms. Hildreth is serving as the executive director of the Calhoun County Economic Development Corporation. She works with small business owners, community groups, and local leaders to foster economic development in rural Iowa. Ms. Hildreth is also the CFO of Martin Hildreth Company, a 70-year-old family-owned and operated small business. Ms. Hildreth has served on several local boards, including as vice chair of the Stewart Memorial Community Hospital board of directors. She earned a degree from Iowa Central Community College. Ms. Hildreth is also a military mom with children who have served in the Iowa Air National Guard and U.S. Air Force. And, Sarah, we want to welcome you to the Committee today with your mother as well, so thank you very much. And on a personal note, I have known Theresa for a number of years. She works within our Iowa State legislature and the Iowa Senate with the senators there, and I had also served in the Iowa State Senate, so we have many friends in common. Next, I want to introduce Mr. Palmer Schoening, and Mr. Palmer Schoening is the chairman of the Family Business Coalition, or FBC, so thank you, Palmer, for being here, which is a collection of over 150 small business associations dedicated to protecting America's family-owned businesses and farms. Mr. Schoening earned degrees from George Mason University and Hillsdale College. Thank you for making the time to share with this Committee how we can better help small businesses with succession planning in Iowa as well as across the country. Thank you all so much to our witnesses. Thank you, Chair. Chair Shaheen. Thank you, Senator Ernst and Mr. Snider, we will start with you. STATEMENT OF SCOTT SNIDER, PRESIDENT, EXIT PLANNING INSTITUTE, WESTLAKE, OHIO Mr. Snider. Thank you, Chair Shaheen, Ranking Member Ernst, and all members of this Committee. It is an incredible honor to be here with you today. My name is Scott Snider, and I am the president and co-owner of the Exit Planning Institute, an Ohio- based, privately-held family business that supports professional advisors who help business owners successfully transition their companies. We provide advisors with a professional network, regional and national conferences, continuing education courses, and, most notably, a credential. We began in 2005 and today serve over 5,000 certified exit planning advisors and another 10,000 professionals throughout the world. As this Committee well knows, there are over 30 million small businesses in the U.S. that employ nearly 62 percent of Americans. For these business owners, nearly 90 percent of their wealth is trapped inside of their largest asset--their company--wealth that will be critical for them to harvest to move into the next phase of their lives, and even more, wealth that has a deep impact on social and economic elements that make up our country today. According to the most recent National State of Owner Readiness Survey, this wealth is projected to total nearly $18 trillion, with $14 trillion alone coming to market in the next 10 years as 73 percent of owners report they want to exit from their companies within that time frame. Historically, there has been a low success rate of privately-held company transitions, an indication to me that business owners are ill-prepared for this eventual exit. According to the same research, 60 percent of owners do not understand their exit options, 80 percent do not have a formal exit strategy, and 50 percent of owners have no plan at all. Worse yet, 70 percent of the companies put on the market do not sell, and 50 percent of the exits are involuntary due to external elements that force business owners to close or sell. These stats remind me of a fellow owner, a business owned by three sisters in Pennsylvania. One of them, in tears, approached me after a speaking engagement and she said she was trying to figure out what was next in her life. One of her sisters had just recently passed away from a cancer diagnosis. She had been the visionary and heartbeat of the company, and without her, the remaining two could not operate the business and closed their doors only 2 months after their sister's passing. Sadly, they became owners who fell to the involuntary exit, something that I believe is preventable by appropriate planning. To understand the problem, we must understand the mindset of the business owner. As owners, we are trained to grow a successful company, one with great employees, great customers, meaningful products and services, a strong balance sheet, and a net profit, but when we go to transition those companies, we are kind of slapped in the face with a harsh and unexpected reality. Though we, in fact, grew something of success, we did not build anything of significance. All our intellectual capital is locked within us, never transferred to anyone else or any one thing. What is a significant company? It is one aligned to the business owner's business, personal, and financial goals. It is ready and attractive with an owner who is well prepared. Most importantly, a significant company is highly valuable and transferrable at any time. Being in the unique position of both teaching the pathway to significant companies but also living it myself as a business owner daily, I see three key opportunities for us to better those who are transitioning their companies. First, educational programming that brings exit strategy into the-- into the present. Incorporating it early and often makes a company stronger at point of transition while making a better company today. At EPI, we have worked with SCORE and the Small Business Development Centers of America in educating both advisors and owners. Secondly, we need greater access to coaching and services. Seventy-eight percent of owners have not formed a transition advisory team that embraces those the three key elements for significance: business, personal, and financial. And lastly, data and research. Policymakers need to better understand succession planning gaps that impact small businesses sales, transitions, and closures. These simple actions, I believe, help to change the owner's mindset, keep small businesses active in our local communities, and put us on a pathway to positively impact our economy, an important conversation, I think, to be had given the number of owners that will transition in the next 5 to 10 years. I thank you for the privilege and honor of sharing my testimony with you today and happy to answer questions as they come. Thanks. [The prepared statement of Mr. Snider follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chair Shaheen. Thank you very much. Ms. Hildreth. STATEMENT OF THERESA HILDRETH, EXECUTIVE DIRECTOR, CALHOUN COUNTY ECONOMIC DEVELOPMENT CORPORATION, ROCKWELL CITY, IOWA Ms. Hildreth. Honorable Chair Shaheen, Honorable Ranking Member Ernst, members of the Committee, and all the distinguished guests that are here, thank you for the opportunity to testify today on the critical topic of succession planning and the challenges facing small business owners, especially in my State of Iowa. My succession planning assessment in rural Iowa is multifaceted, shaped by my personal, my professional, and policy perspectives. Addressing challenges related to retirement and ensuring a smooth transition for our family business is not a--not only a personal concern, but also has broader implications for my local community. In economic development, my role involves aiding sustainability and growth of a rural economic area designated as an opportunity zone. Succession planning on a broader scale becomes essential for the economic well-being of the entire community. My policy perspective shares great concern for the current State of the Nation's economic future with succession planning involving policy advocacy. My family's business, Martin Hildreth Company, is a three- generation, 70-year-old underground utility contracting business. We are--we currently are facing the complexities in transitioning now to our third generation. Due to our current economic concern and uncertainties, we have decided to extend our succession plan to 5 years rather than our original 3 years, unless we see big changes after the election in 2024. As we compare today's challenges to the previous generation transition in 2009, we find a much harsher economic landscape. Concern with today's inflation, company valuation, and long- term success adds to that complexity. My interactions with other business leaders, particularly aging farmers, reveal that these are common concerns and challenges and reflect-- reflective of a broader issue impacting rural economic development. As in our business, farmers often prioritize inheritance over selling assets in succession planning to mitigate capital gains tax. Iowa's recent inheritance tax initiatives is reflective of a positive step towards supporting retirees and succession plans. Many businesses struggle to access available programs and grants for opportunities and growth. A 2023 study by the Rural Policy Research Institute found that 42 percent of rural businesses lack awareness of available government programs. The agricultural sector and many rural small businesses face a scarcity of qualified and available employees. The USDA's 2021 Census of agriculture reports the average age today of Iowa's farmer at 57 years. Four times as many farmers are over the age of 65 than under the age of 35. In 2022, the USDA National Institute of Food and Agriculture reported sites--report sites of 30-percent decline in young farmers since 2010. Beyond capital gains tax, many small businesses struggle with the rising cost of doing business, high interest rates, supply chain issues, insurance, and that ever fluctuating fuel cost. National Federation of Independent Businesses reports that 82 percent of small businesses are concerned about inflation impacting their operations. This point directly relates to risk and the concern for entrepreneurs to assume great risk in economic endeavors. Specifically in Calhoun County, the economic landscape bears the scars of a 17-year decline. Our once thriving county is steadily shrinking, a startling 15 percent loss of businesses. The lack of succession of business is a vital component in this downward trend, casting a long shadow on tax revenue, essential services, and the very spirit of our towns. This is not merely a statistic. It is a human story unfolding before our eyes. One example of the human story of economic decline in Rockwell City, the county seat of Calhoun County, is the loss of a second-generation plumber. The 52-year-old plumbing professional suddenly passed away this past December. Now his 73-year-old father has abandoned retirement to resume leadership of the only plumbing business in the community. These challenges, while impacting individual businesses, resonates with the larger economic issues facing rural communities. Engaging with political stakeholders and advocating for supportive policies becomes crucial. We need policy alignment. We need collaborative approach. Through collaborative efforts and supportive policies, we can build a more resilient and sustainable future for rural communities and enhance business succession planning. Thank you for allowing me to share my testimony with you. I may not be a silver cyclone, but I am a silver Hawkeye. [Laughter.] [The prepared statement of Ms. Hildreth follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chair Shaheen. Thank you, Ms. Hildreth. Ms. Croscut. STATEMENT OF TABITHA CROSCUT, SHAREHOLDER/ATTORNEY, DEVINE- MILLIMET & BRANCH, MANCHESTER, NEW HAMPSHIRE Ms. CROSCUT. Good afternoon, Chair Shaheen, Ranking Member Ernst, and members of the committee. My name is Tabatha Croscut, and I am a shareholder at the New Hampshire law firm of Devine-Millimet & Branch. For over 20 years, I have helped my clients who are business owners of both small and large privately-held businesses to assess, consider, and navigate the feasibility of implementing, employee stock ownership plans as an ownership succession strategy. I would like to thank you for the opportunity to appear before you to discuss the importance of succession planning and for allowing me to share with you how and why ESOPs can be a better option for many business owners looking for a sustainable and impactful succession strategy. As a result of a lack of planning, each year many companies in New Hampshire and across the U.S. bought up by third parties, and some even close their doors when they are unable to find a buyer. This is a challenge not only for the business owners, but also for the many families and communities that rely on their businesses. It is my position that ESOPs can be and should be a powerful tool for solving succession planning issues for such businesses. In the Granite State, there are approximately 30 ESOPs and privately-held companies. Of these ESOPs, approximately 27 are headquartered in small towns in the Monadnock region or White Mountains, cities like Manchester or Salem. These are companies that are staying in New Hampshire and are heavily invested in the success of their communities. Those 30 New Hampshire ESOP- owned companies cover over 4,600 participants. Most are smaller businesses. In fact, more than two-thirds have under 100 employees. You might be wondering why are there only 30 ESOP-owned companies in New Hampshire? I see two primary obstacles to the utilization of ESOPs as a succession strategy, not only in New Hampshire, but across the U.S. First, there is a low public and professional awareness about ESOPs. Second, there is a shortage and/or absence of lending capital for ESOP formations and the related stock acquisitions from business owners. Before discussing how we can address those obstacles, I would like to take a minute to share with you an ESOP success story from New Hampshire. Based in rural Dublin, New Hampshire, Yankee Publishing is an 88-year-old family business that publishes the ``Old Farmer's Almanac,'' the oldest continuously published periodical in North America. ``Yankee Magazine,'' ``New Hampshire Magazine,'' and the ``New Hampshire Business Review,'' to name a few others, are published by Yankee Publishing. It employs approximately 75 people in a region of New Hampshire where the town populations typically consist of 2,000 people or less. When it came time to start seriously considering an ownership succession plan, Yankee Publishing had 11 third-generation shareholders, two of which worked in management. The combined ownership was looking ahead to around 22 children, none of whom were particularly interested in running the company. The need for a viable ownership transition strategy became pressing. Ownership considered all of the standard succession options: a shareholder buyout, a management buyout, selling the company to a third party. However, ownership felt that they had a duty to continue to preserve not only the family legacy, but also Yankee Publishing's commitment to the community. As such, they spent some time researching and decided to go forward with the sale of the company stock to an ESOP for the benefit of the company's employees. Today, the company is a hundred percent ESOP owned. While Yankee Publishing is a great example of a successful ownership transition utilizing an ESOP, we continue to struggle with the challenges of access to capital for ESOP transactions and a greater awareness of the ESOP succession strategy. Chair Shaheen and others have supported several bipartisan policy solutions to address these issues, including the Main Street Ownership Act passed in 2019 and the Worker Ownership Readiness and Knowledge Act in 2023, but more is needed. The Mainstream Ownership Act passed in 2019, was championed as a win for ESOPs, but it was, in fact, slow in providing additional access to capital for ESOP transitions through SBA's 7(a) lending program, which, due to certain procedural requirements, actually had minimal impact on ESOP loans funded by the program. We must continue to streamline the SBA 7(a) loan process to make it more appealing to small business owners. As previously mentioned, awareness of ESOPs is a primary barrier to businesses utilizing the ESOP for their ownership transitions. If a business owner and their professional advisors are unaware of how ESOPs work or that ESOPs even exists, they will lose out on the opportunity to transition ownership to an ESOP, and, instead, many end up selling to a third-party buyer or simply shut down the company. While the recently passed Main Street Ownership Act directs the SBA to promote such awareness, a step in the right direction, that only helps when the SBA has adequate support, structure, and resources to implement that directive. The numbers show that if we can support the expansion of State centers throughout the United States, while also empowering the SBA's promotion of ESOPs through small business development centers, business owners will have more access and be better educated on the ESOP succession option, which will lead to stable jobs and stronger communities. In conclusion, there is a significant challenge for all privately-held businesses across the U.S.: ownership succession. I propose to you that ESOPs should be a great part of that solution, which will keep good jobs intact and strengthen local communities. With more awareness of the ESOP option, we can ensure this once-in-a-lifetime decision for many business owners to sell their companies is also a win-win for employees and the communities in which they live and work. I appreciate the opportunity to appear before the committee, and I look forward to answering any questions you may have. [The prepared statement of Ms. Croscut follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chair Shaheen. Thank you, Ms. Croscut, and thank you for mentioning Yankee Publishing because it points to not just the jobs and the assets that are involved in the community, but the real cultural contributions that so many of our small businesses make that sometimes get lost when they cannot do the succession planning. So Mr. Schoening. STATEMENT OF PALMER SCHOENING, CHAIRMAN, FAMILY BUSINESS COALITION, WASHINGTON, D.C. Mr. Schoening. Chair Shaheen, Ranking Member Ernst and members of the U.S. Committee on Small Business and Entrepreneurship, thank you for the opportunity to address the important topic of small business succession here today. I currently serve as chairman of the Family Business Coalition, FBC. Our mission is to protect family-owned and operated businesses across the country. Family businesses are the lifeblood of the American economy, providing good-paying jobs and enriching the lives of those in their communities. When a family business closes its doors, it is not only the employees who suffer. It is the little league baseball team that the local family business sponsors. It is the new wing of the Children's Hospital being built with the local support of family businesses that now has to be put on hold. It is the soul of Main Street that withers away when family businesses are sold off to multinational corporations or forced to close their doors for good. Family businesses that we work with consider their employees to be family as well. When times get tough, both owners and employees tighten their belts to keep the business running. When times are prosperous, the employees of family businesses are the first to benefit. Most family business owners specialize in running their businesses but not in legal paperwork. Succession planning requires hiring expensive accountants, lawyers, and estate planning attorneys. Even business owners that plan effectively must remain on their toes because of constantly changing tax laws and regulations. All this diverted time, money, and energy could be better directed towards growing their family business, upgrading equipment, hiring more workers, or supporting their communities. I show in Figure 1 of my testimony that fees can range between $5,000 to $15,000 just to set up a simple trust, and more sophisticated estate planning for larger family businesses can cost hundreds of thousands of dollars. It is easy to see how family farms or local mom-and-pop shops can be quickly overwhelmed by both the cost and time required to plan for the next generation. The 2017 Tax Cuts and Jobs Act, TCJA, made important improvements to the Tax Code for passthrough businesses, including lowering marginal tax rates, creating a new small business tax deduction, and doubling the estate tax exemption. FBC supports making these changes permanent to provide predictability for family-owned businesses that have been forced to grapple with an ever-changing Tax Code over the past 25 years. Congress is now quickly approaching another moment of crisis as most individual side tax relief will expire at the end of 2025. Another last-minute game of chicken between the parties approaching this deadline is the last thing that family businesses need. The Federal estate tax, commonly referred to as the death tax, presents a potential succession challenge for family businesses, especially inventory or land rich, but cash poor businesses that tend to operate on low margins, like family farms. When a family does not have the cash on hand to pay the estate tax, they may be forced to fire workers, sell off parts of the business, or, in the worst cases, close the doors of their family business permanently. As family business owners and farmers will tell you, annual expenses related to estate planning are a constant drag on business. According to the Tax Foundation, compliance costs related to estate and gift taxes totaled $18.9 billion in 2023. According to IRS data, collection from estate taxes totaled only $18.4 billion in 2021. These numbers show that the estate tax costs more to comply with than the government collects annually in estate tax revenue. Given these massive compliance costs, the estate tax's negative impact on job growth, and the tiny amount of revenue that the tax collects, the Family Business Coalition stands in strong support of Senator Thune and Senator Ernst's efforts to eliminate the tax. Our FBC letter of support for the Death Tax Repeal Act included 150 signers, including groups like the Associated Billers and Contractors, Wine and Spirits Wholesalers, National Association of Electrical Distributors, and more. Ranking Member Ernst deserves credit for continuing to build consensus on this important issue and move the legislation forward in the Senate. FBC has also opposed a number of tax proposals that would make succession more difficult for family businesses, including eliminating step-up in basis and creating a new tax on unrealized capital gains. If Congress hopes to improve the chances for family business succession, permanent tax relief for small businesses should be an immediate priority. FBC looks forward to continuing to work with both parties in Congress to help America's family businesses and farms pass to the next generation of ownership. Thank you for calling this important hearing, and I look forward to the discussion here today. [The prepared statement of Mr. Schoening follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairwoman Shaheen. Thank you all very much for your testimony. I want to ask each of you to tell us--each of you provided a number of options for what we should think about as we are looking at succession planning, but as each of you think about what is the most important thing that this Committee could do to promote more succession planning for families, what is the one thing that you would say, Mr. Snider? Mr. Snider. I would say educational programming. I think that most owners, as you heard in my testimony, do grow successful companies, but they are not relating that to the overall value and an eventual transition. It is not necessarily because they are bad owners. I think, generally, because, I think as an owner myself, you are kind of just taught as an entrepreneur to do kind of what you heard in my testimony, grow something of success. So I think having educational programming that is available, readily available, I think is a critical first step in just generally changing the owner's mindset. Chair Shaheen. Ms. Hildreth. Ms. Hildreth. Thank you for that question. I would say, based on what I see every day, we have to save our family farms. We feed the world, and succession planning for our farmers is critical. As I said in my testimony, we are old, and we need these young, vibrant, willing, and able-to-work farmers to step forward, and if they cannot--if they cannot own the land, we have seen where some of these not so nice people from other countries want to come in and buy up our land, and we just cannot allow that to happen. Chairwoman Shaheen. And how do we get more young people interested in family farming? Ms. Hildreth. The young--I think the young people are there. It is all about risk. Will the banker take the risk of the young kid who cannot buy the entire farm because half of it has to go towards paying capital gains tax? So if we can fix that--kids who grow up on the farm really do not want to leave the farm, but they are forced to because land costs, equipment costs. I will tell you what. If you talk to kids that grew up on the farm where I am from, they all want to stay there, and if they can, they do. They have to find a way, and we have to help them to find the way to stay on the farm, own the land, and continue to feed the world like Iowa does. Chair Shaheen. Ms. Croscut. Ms. Croscut. So I am going to go back to education. I do think it is all about education, and not only providing it, but helping other organizations to provide that education so that it gets widespread, whether it is about ESOPs or estate tax, or it is about different succession options, I think it is all about making sure that the business owner knows what is out there, right? They cannot plan around anything if they do not understand what the options are. And so to me, I would agree. I think the number one is the education aspects of everything we are talking about and being able to spread the word. Chair Shaheen. And do you see a role for--is that something you see that the Small Business Administration should help do? Ms. Croscut. Absolutely. Yeah. Chair Shaheen. Mr. Schoening. Mr. Schoening. My number one recommendation would be permanent tax policy. If you look like--look at policies such as the estate tax, over the past 25 years, the exemption and rate has changed 20 times. It makes it incredibly difficult to plan if family business owners cannot project forward at least 10 years with respect to tax policy. Chair Shaheen. So, Mr. Snider, as you are talking about educating people around estate planning, how does the estate tax factor in your discussions with small business owners? Mr. Snider. Certainly. So I think the estate tax is obviously a critical conversation, but, for me, I just step all the way back. If you look at small business owners, 70 percent of them have no estate plan, and something like 76, I think it is, they do--they do not have a will. So I think, obviously, the estate tax conversation is a critical one, but I think we got to go all the way back to say most of them do not even the estate plan, so are they even considering the tax yet? Chair Shaheen. And so what--how do you advise people when you hear that from the small business owner? Mr. Snider. From the standpoint of not having a--having an estate plan? Chair Shaheen. What do they tell you is the reason why, number one---- Mr. Snider. Sure. Chair Shaheen [continuing]. And then what--how do you convince them that this is something that they really need to do? Mr. Snider. This goes back to education and the change of the owner's mindset, right? So I think it first starts with a conversation. I think, again, most owners are concentrated on that daily, especially the small business owners and that lifestyle company. What they are not thinking about is this value creator mindset. Whether you are the big manufacturing company or the dry cleaners or the auto mechanics shop on the corner, they are in the day-to-day. They are not looking long term. So when we sit down with a business owner, we try to look at it across all three elements--business, personal, and financial--and have a more of a long-term value type conversation with them. Chair Shaheen. Thank you. Senator Ernst. Senator Ernst. Thank you very much. Ms. Hildreth, let us start with you, and thanks again for being with us today and sharing your work on behalf of Iowa's small businesses and your personal experience with succession planning for your own business. As the executive director of Calhoun County Economic Development Corporation and a small business owner yourself, you do have that firsthand knowledge on the taxes that small business owners face. Can you explain in more detail the concerns that small business owners and farmers have about capital gains taxes during the succession process? Ms. Hildreth. Thank you, Senator Ernst. From my own experience, I grew up on the family farm, and when my parents passed away--my mother passed away in 1992, my father, 15 years later--I inherited, along with my brothers and sisters, the family farm. What a glorious day, and my tax attorney--when I got that check, the tax attorney said to me, now, take 25 percent of that and put it away because you are going to have to pay your capital gains tax, and at that time, inheritance tax at the same time. What a blow. And I questioned, my parents worked for 50 years building this farm. Every dime went back into the farm other than what we needed to live, and we did not live an extravagant lifestyle. Senator Ernst. Mm-hmm. Ms. Hildreth. And my father paid taxes the entire time-- property taxes, income tax, profit tax--and it is unfair, in my opinion, that when that passed along to his children, we were taxed again. In Iowa right now, capital gains tax is 6 percent, but at the Federal level, it is either zero percent, 15 percent, or 20 percent, based on your income level, so now potentially 26 percent again for capital gains. It inhibits the progression of the family farm for those landowners, and I just do not want to see those family farms go away. I live in rural Iowa by choice, and that is where I want to stay, and I want my neighbors to do well. And as economic development director, I see them everywhere, and everybody knows everybody in my community, and if somebody is suffering, we all know about it, and it is devastating to the environment. It is devastating to the community. My personal business, we are an underground utility contractor. You got a sewage problem, who are you going to call? You are going to call us, and that is devastating if you are in the midst of it, and we want to make sure that my company, as other essential service providers, are here to handle those details, those messy details. A lot of times for our future, it is all about our future. Senator Ernst. Yeah. Thank you. Thank you, Ms. Hildreth, and, Mr. Schoening, thanks again for joining us, and I am glad that you are working to support our small family-owned businesses. In 2017, we did pass the TCJA, a tax reform law that helped Main Street and the American middle class. This included doubling the death tax exemption and indexing it to inflation. These provisions are set to expire at the end of 2025. What issues do you see small business owners facing if Congress allows the reforms we made to the death tax in the TCJA to expire? Mr. Schoening. Well, if that relief expires, Senator, we can count on more family farms and businesses being in the crosshairs of the estate tax certainly, and as you know, it is not only the estate tax exemption that expires. It is the 199A small business deduction. It is marginal tax rates across the board. It is even the standard deduction. And so this is overwhelming to think about for our business owners, and that is why we are pushing for a permanent extension of the current policy. Senator Ernst. Okay. Thank you, and I will yield back. Thank you. Chair Shaheen. Senator Cardin. Senator Cardin. Thank you, Madam Chair, and let me thank all of our witnesses, and thank you for this hearing. To me, it is an extremely important aspect. Small business owners, yes, education is important, but when you are at the beginning stages of a small business, your entire attention is towards making your business viable, doing everything you need to keep the business going. You cannot really take that much time to try to figure out what is going to happen 20 years from now or 30 years from now. That is understandable, and you do not have consultants on staff that can help you deal with those types of challenges. So the reality is that small business owners start a business, it grows, and then at some point, they realize they have an issue they have to deal with. And secession planning is challenging for many different reasons. Some of it is a family-owned small business, you can have family dynamics that make succession a challenge, and as you get to generation two or generation three, it gets more and more complicated, particularly if you have large families, and I am not against large families, but it does make it more complicated. Add to that that you have principals in the business that have now reached an age where they would like to step back. Do they have retirement security? Do they have to take the equity out of their company in order to deal with their retirement needs, which affect the succession of their small business? These are all challenges that we have to figure out how do we deal with as we go forward? We try to deal with some of this on Secure 2.0 by offering additional retirement options for smaller companies so that they could participate without the cost or burdens that larger--the requirements on larger companies. So, Mr. Snider, I would like to just have you dwell on that a little bit. Is there more that we can do to deal with the legitimate concerns of retirement security for small business owners so that they can get engaged at an earlier stage, recognizing years go by pretty quickly? Mr. Snider. Yeah. Certainly, I think, going back to the education topic, I do. I ran--I started my first business when I was 16 out of the--out of my desk in the geometry class. I probably should have been paying attention more in geometry class---- [Laughter.] Mr. Snider [continuing]. But nonetheless, I was certainly starting that landscaping company. But I think what we could do early and often, I think if you look at professional advisors, that is in the area that EPI works, having them also understand the exit planning process so you could have that conversation early and often. What we say at EPI is that exit strategy is business strategy. There is really nothing different, is that if you think about the things that you are doing, whether you are first starting or you have a more mature company, you are doing things in your business every single day that eventually will affect your exit from a business, personal, or financial standpoint. To your point, owners aren't thinking about that early and--early and often, but I think that if--when they turn to their board, they turn to their mentors, they turn to something like the SBDC, the family enterprise center, if those folks that surround those owners are also educated in the process, they can begin that conversation early and often. My father is sitting behind me, and I am lucky enough to have a dad that is a certified exit planning advisor, so it becomes a lot more natural for me to have, but it was a conversation that Dad had with me early in my business career. Senator Cardin. A suggestion in regards to the services offered by resource partners is an area--that is an area, I think, that could significantly improve their services to small businesses, whether it is women's business centers or the small business development centers. I think they could do a more effective job, or it could have a higher priority on these type of issues, our veterans outreach business centers. There is one tool that I have found that can be particularly helpful. There have been many companies in Maryland that have converted to ESOPs as an effort to provide a way in which the management owners can retire, have retirement security, and can keep the company going with its current workforce as co-owners. We have tried to make ESOPs more available and transitions into ESOPs easier. There are some times appraisal issues. We dealt with that in Secure 2.0 to make that a little bit easier. Do you see ESOPs as being a viable way that we could strengthen that tool to make it easier for small companies to have succession plans that keep their workforce intact, ownership intact, but allow their senior management to be able to have retirement security? Mr. Snider. I would certainly have our ESOP expert to comment on that, too, but, yes, I think ESOPs, more so than ever in our country, are a strong exit option for many companies, something that Dad and I have even considered in our own business. Senator Cardin. Do you want to comment on that? Ms. Croscut. Of course. [Laughter.] Senator Cardin. You have been identified as our ESOP expert. Ms. Croscut. I absolutely agree with that. I would say that, you know, an ESOP is not the right tool for every company, right? Those of us who work in the ESOP space agree with that, acknowledge that. There are other options out there that are perhaps better depending on the company. But absolutely, having everyone who is included in the business owners' life and helping to advise them be aware of the options, including an ESOP, is really important. And I do believe there are many companies that are not aware of the ESOP option and they should be, and they would probably select the ESOP if they knew it. Senator Cardin. Thank you. Thank you, Madam Chair. Chair Shaheen. Thank you, Senator Cardin. I would just point out that the second vote started at 2:59, and so Senator Ernst has gone to vote. When she comes back, I will go, but for others who have not voted, just be aware of that. I also want to welcome Mr. Snider's dad to the hearing. Make sure he does a good job. Voice. [Inaudible.] Chairwoman Shaheen. Yeah. Senator Hawley. Senator Hawley. Thank you, Madam Chair. Thanks for having this hearing, and thanks to all of the witnesses for being here. Ms. Hildreth, I want to start with you, because I was just so struck by your opening remarks, and then your back and forth with Senator Ernst, particularly as it relates to farmers and the challenges that they are facing. Missouri, which is the State I represent, we have 95,000, about, family farms in the State, and we are very proud of that. That makes us the second most by number in the entire United States, not by proportion, but by number, and, you know, we are not one of the biggest States in the country, so we are very proud of that. And I come from a farming background and so does my wife, so it is something that is very near and dear to my heart. And I just want to ask you a couple of things related to that and some of the comments that you made. Let us just start maybe, though, with the capital gains issue and how that factors into succession planning that you have seen, you know, just your own experience. I mean, what does--you talked a little bit about your own experience with this and the unfairness and surprise of being told that, you know, here is--here is this farm that you have inherited but that you are also now responsible for, and the first thing is you have got a massive tax bill that you now have to pay. So just in your own observation and from your own experience, what is that like, and how do you think that affects farmers who are saying, boy, I want to--I want to keep this farm in the family, I want to give my son or daughter a shot at farming, but we have got to get around this obstacle, and just talk to us about that. Ms. Hildreth. Thank you, Senator Hawley. I have a very good friend. His name is State Senator Dan Zumbach, and he is in this situation with his son right now, and he was explaining to me the other day in the chamber, he says, we cannot succession plan and sell our land to our son. It just cannot work. We have to wait until I die, and then he and his three siblings will inherit, and then he will have to deal with buying them out, even though they have no interest in farming. And now the burden is to him, and it is--it has really put them in a place where they are frustrated, and as a State senator, I know he is looking at what can we do at the State level. So that is my experience as I talk to some of my colleagues. Senator Hawley. Yeah. Ms. Hildreth. And my role is executive director of Calhoun County Economic Development. Well, I am 7 months into this job, so education is really key for me as a leader, as a community leader, and there is so much to learn. Everything that you are all talking about today are things that I need to go home and I need to learn more about. So I think it is from our leadership as well, you as a--as a senator, our representatives, our mayors, our county supervisors, to educate themselves and have these conversations at the church coffee---- Senator Hawley. Mm-hmm. Ms. Hildreth [continuing]. You know, at the fellowships, at the Sweet Corn Day celebration, you know, whatever it is. But I--it is really education---- Senator Hawley. Yeah. Ms. Hildreth [continuing]. And knowing what is there and finding, I am sorry, but back doors around things---- Senator Hawley. Mm-hmm. Ms. Hildreth [continuing]. Because we know all those back doors do exist. We just got to find them. Senator Hawley. Mm-hmm. Let me ask you. Well, I just want to say it should not be that farmers or any other small business owner should have to go to a back door in order to pass along their business to their family, and, particularly, as you pointed out, with the land issue. I mean, you would think in this country--I think people who do not know anything about farming often think, oh, there is plenty of land. There is no--there is no land problem. There are gobs of land out there. Boy, you go tell that to a young farmer and trying to find land, trying to buy land. Nobody can afford land. Nobody can get a shot at it. I mean, so this is a huge, huge obstacle that we have got to solve. I want to ask you in my brief remaining time here one other thing actually related to land that you brought up. You mentioned foreign ownership of land. Ms. Hildreth. Mm-hmm. Senator Hawley. To me, this is such a huge issue. At a time when our younger folks cannot afford to buy land, farmland in our country, to have foreign nations and foreign corporations coming in and buying up that land, it just seems unbelievable. You mentioned it. I would just like to give you a chance to say something more about that. What is your perspective on it? Ms. Hildreth. It will kill the family farm. These foreign adversaries, they are going to come in, and if given the opportunity, they are going to suck up the good land, and who knows what they are going to do with it? Our farmers, our Iowa farmers, as I am sure our Missouri farmers, are stewards of the land. They take care of the land. They reinvest in the land. They are worried about water quality. They are worried about cover crops. They are stewards of the land, and my fear is some of these other companies that come in and buy land, they are not going to be stewards of our land. Senator Hawley. Thank you, Madam Chair. Chairwoman Shaheen. Thank you, Senator Hawley. Senator Rosen. Senator Rosen. Well, thank you, Madam Chair, really, for holding this hearing today, and thank you for the witnesses for being here. I am going to thank the dad as well and, of course, all your parents, spouses, siblings, your whole families. But, you know, this issue is so important because small business is the backbone of America. It really is part of the American Dream, and I can tell you that in Nevada, 99 percent of businesses are small businesses, and so that just continues to grow, and it is a backbone of my State as well. And we have a really deep rural frontier State in so many ways, and small businesses, they just play a crucial role in my rural communities all across Nevada. And they are key employers from the backbone of our local economies. They help create wealth through long-term family business ownership, just like you are talking about, whether it is a family farm or some other kind of business. And so it is critical that we create the environment for our rural communities so those businesses can continue operating and serving the residents even after a change in ownership. So, Mr. Snider, you are getting all the questions here today. Can you discuss the importance--you did talk about the importance of succession planning, but in rural communities, we have in Iowa, New Hampshire. You know, D.C., I guess we have-- around us is rural, but rural communities may not have as many resources as maybe some of our urban communities just to seek out as far as even from the SBA or attorneys and the like. What can we do to be sure our rural communities do not get left behind? Mr. Snider. I like the conversation around, like, economic development centers, family enterprise centers. Even think about, like, your schools, like, alumni associations. Senator Rosen. Oh---- Mr. Snider. So there is, like--we have worked with colleges and universities---- Senator Rosen. Uh-huh. Mr. Snider [continuing]. And perhaps there is a committee on entrepreneurship---- Senator Rosen. Right. Mr. Snider [continuing]. That that alumni association has. So, again, I know it is kind of maybe---- Senator Rosen. A community college---- Mr. Snider. Like a community college. Senator Rosen. Yeah. Yeah. Mr. Snider. Yeah. Sure. So I think it is critical for the-- for the rural communities because there is just less businesses there. Senator Rosen. Mm-hmm. Mr. Snider. And to your earlier point, really the backbone of that community. I think you were talking in your testimony about the little league baseball team and the things that business owners do, particularly in those smaller communities. So I think I go back--I know I have said it 3 times now here in this hearing, but I think it goes back to education and just that critical mindset shift for the business owners and the people that surround them provided through smaller organizations like an SBDC, alumni association, and again, changing that conversation. Senator Rosen. Being sure they get out to our rural communities is particularly important. Mr. Snider. Right. Senator Rosen. And we do know they sponsor all the--all the sports teams---- Mr. Snider. Yeah. Senator Rosen [continuing]. And so many other things. A lot of our social services are also sponsored---- Mr. Snider. Sure. Senator Rosen [continuing]. And supported--local social services by our philanthropies by our philanthropies, by our business community as well. And in Nevada, we are a younger State. We have a lot of first-generation business owners all through the state, 280,000 small businesses, like I said, and about 20 of them are--20 percent of them are Latino owned and many more are minority owned in general, and so they are incredibly small businesses, family-run businesses, first- generation businesses. And only half--particularly our Latino community, only half of our Latino business owners have a succession plan in place, and I am concerned about the long-term success of these businesses. And so, Ms. Croscut, we are going to move over to you this time. What challenges do you think first-generation small business owners, especially those maybe from some of our minority communities, face when navigating the complexities of succession planning? Ms. Croscut. I am assuming it is overwhelming, you know, for any first-generation who is probably trying to figure out how to run the business and not really thinking about the exit strategy there, but I think there are a lot of those companies out there, right? Senator Rosen. Mm-hmm. Ms. Croscut. There are probably as many as there are retirees transitioning, and they need the same level of assistance from their advisors. There are all kinds of, you know, potential challenges, right? Senator Rosen. Yeah. Ms. Croscut [continuing]. Whether it is getting financing for what they need for the business, whether it is figuring out what the exit strategy will be, getting labor. You know, there are labor shortages. Senator Rosen. Labor shortages. Very hard in our rural communities. Ms. Croscut. Absolutely. Senator Rosen. Yeah. Ms. Croscut. So just the--just the day-to-day is a lot, right, for any first-gen business, and then to sort of figure out what am I going to do next when the business has run its course and I need to retire, so. Senator Rosen. Well, I see that my time is just about up, so I will yield back because--are you quite ready there, Senator Hickenlooper? Senator Hickenlooper [continuing]. 30 seconds. Senator Rosen. I will turn it back to---- Senator Hickenlooper [continuing]. 10 seconds. Senator Rosen. I will back to--we will filibuster here. [Laughter.] Senator Rosen. Thank you all again for being here. I yield my time back to Chair Shaheen. Thank you. Chair Shaheen. Senator Hickenlooper, if you are not ready, I think Senator Ernst and I are going to do another round. So if you are ready---- Senator Hickenlooper. No, I am ready. Chair Shaheen. Go ahead. Okay. Senator Hickenlooper. I am ready. So I have been looking forward to this as someone who has loved looking at things like ESOP. You know, Colorado has a wonderful brewing company called New Belgian Brewing Company, and the founders of that were old friends of mine from my early days. I always point out that they were a couple of years after we were. But anyway, that notion of being able to take a workforce that often functions like a family and basically include it as part of your estate planning, and figuring out a way to make sure that that magic and that chemistry is preserved and, at the same time, creating opportunities is a big deal. I will start with Ms. Croscut. Back in 2007, I sold the--my brew pub. We didn't use an ESOP, but I sold out to my partner and then a number of our senior employees, and they were able to--he guaranteed to take them on and function in a similar way. These days, transitioning to employee ownership probably is easier ever in Colorado, thanks to the State has an employee ownership office. There is a commission on employee ownership and an employee ownership tax credit that have all been put into place kind of at the end of when I was governor and now. What elements of Colorado's system to support employee ownership should the Federal Government consider adopting? Ms. Croscut. Thank you for raising that question. I think there are many aspects to what Colorado is doing that the Federal Government can take as sort of a path, a strategy. One of those is just the idea of setting up State centers with State funding or government funding. We have seen that in the ESOP community at large, that the centers in various States--I sit on the board of the Vermont Employee Ownership Center as an example. Centers that are set up in schools, colleges, you know, their financial issues are different than the centers that are set up with Federal-State funding availability. They are--they are more consistent, right, and they can do things that other centers that are outside of that and not getting that funding might not be able to do. They also bring somewhat of a sense of sort of a stamp of approval, right, to the people who utilize them, because if they are set up as a sort of government entity of sorts. When a business owner reaches out to them, it is sort of like, okay, well, this entity offering ESOP education or employee ownership education has that sort of sense of approval versus maybe a consultant who is in a not-for-profit or something like that. So there are just some really large benefits, we think, from that structure. Senator Hickenlooper. Good. Ms. Croscut. Yeah. Senator Hickenlooper. Great. I would ask each of you, there was a book called the ``Great Game of Business.'' I am sure some of you have seen that, but it is talking about the Springfield Remanufacturing Company, which I actually went to visit at one point when I was still in the private sector just because I wanted to see about them. But one of the--one of the, I thought, great things about ESOP and that kind of transition is that it leads you to open book management, whereby, you know, you do not know the details of what your coworkers are getting paid, but you are able to see what the revenues are, what your costs are, and how well you are doing, which I found to be very beneficial. What is your take on that in terms of that open book management? Mr. Snider. It is something that we have in our own--our business is not a--is not an ESOP, but I would challenge any business owner to be more open with their employees and create that culture. I think certainly in the ESOP world, more open than ever because you have to be, but I think that kind of open book culture, especially for younger generations, who, I think, look for ownership or ownership in some form. I think a critical path for creating a great business is kind of an open book, open culture policy. Senator Hickenlooper. Right. Ms. Hildreth. Thank you, Senator, for that question. I am a small business owner, and our employees see a number on a whiteboard in my office, and these are young men, not out of college very long, great employees, salt of the earth, great people. But they walked in my office one day and they said, what does that $159.87 mean--hundred and fifty-nine and eighty- seven cents--and I said to them, that is how much money we need to bill every day, 365 days a year to cover our insurance cost. I need them to be aware of things like that, that as an employee, you do not worry about general liability insurance or workman's comp insurance. You are worried if you are going to get a paycheck. So I think it is mentorship, and it is going to the basic foundations of operating a business and educating your employees. These are the challenges. This is why it is so important that you do this or you do that or why I do this so you get paid. Senator Hickenlooper. Yeah, I agree, and that is one of the open book lens of that kind of mentoring. Anything to add? Mr. Schoening. I think you will find, generally, with family businesses, they do have an open book policy, even if it is not mandatory. When things go wrong in a family business or times get tough, everybody tightens their belts together. That is somewhat different than a multinational corporation where the executives' pay may be tied to the stock performance or something like that, but it is a much different dynamic in a family business or a family farm, and I would say, for the most part, I would associate myself with what Theresa said. She runs an open book type policy, and I think a lot of our family businesses do as well. Senator Hickenlooper. Right. So interesting. I am out of time, but I will leave you with just the one thought, that a couple of different polls have gone out and talked to people about the primary motivation that people use to start a business. And I was shocked that, you know, over three-quarters of people, it is not to make more money. It is because they do not want to have a boss, and I believe that so deeply, and when I finally understood that, it really changed my worldview about small business and what an important and powerful thing it is. Thank you. Thank you all for coming in today. Chair Shaheen. So how does that track with the fact that now that you are in the Senate, you have thousands of bosses in your constituents? Senator Hickenlooper. No, no, no. I view myself as their servant---- Chair Shaheen. Okay. Senator Hickenlooper [continuing]. In the same way that as a restaurant, I try to serve all my staff. Chair Shaheen. Good. Senator Hickenlooper. But I still think I am the boss of my life. Chair Shaheen. Thank you, Senator Hickenlooper. I have-- Senator Ernst had another engagement, so she needs to leave, and I have to go vote, but I do have one final question, Ms. Croscut, that I would like to ask you, because in your opening statement, you talked about the 7(a) Loan Program and changes that have been made to try and make those more helpful to ESOPs. Have you seen that that has made a difference in terms of interest in using the program? Ms. Croscut. Excellent question. So I think I would respond to that in two ways. The level of interest, I think, is related to, again, back to education, unfortunately, right? We had some struggles with that program, but you do not get to the program until you first hear about ESOP, so if you are not hearing about ESOP, you are not getting to that stage of using the 7(a) loan. What I have seen in my recent experience is that the program has improved, that we were able to use it, at least in a recent engagement, to transition to a hundred-percent ESOP ownership in a successful way that was not traumatic. In previous experiences, it was a little bit traumatic. It was very drawn out. There were a lot of requirements that were difficult for us to really provide to SBA, but there have been certainly some improvements, and I think it is just going to take some time and some additional education to be able to utilize that fully in the new state that it is being offered. Chair Shaheen. Thank you. That is helpful, and as we are talking about education, virtually all of you have mentioned the importance of educating small business owners about the challenges of succession planning, and I think we would all agree that SBA has a role to play in that. The resource agencies, the women's business centers, SBDCs also have a role to play. Is there more that could be done by those agencies, or should we be asking them to partner with other entities or organizations to try and get the word out about the resources that are available to people? Any thoughts about--final thoughts, Ms. Hildreth? Ms. Hildreth. In Iowa, we have a program that is starting up not too far from me. It involves nine counties, and it is called Hub 7 1-2. It is federally funded. It is a 2-and-a-half- year program. I do not know a lot about the backside of it. Chair Shaheen. Do you know who funds it, through what agency? Is it funded through rural development, or through---- Ms. Hildreth. I think it is through rural development, and it--the process has been going on. The Greater Carroll Economic Development Corporation is leading that for Carroll County and eight counties surrounding that. And Hub 7 1-2, it is all about growing entrepreneurs and bringing to them the tools that they are not finding someplace else. Maybe they do not know where to look, but the backbone of it is mentorship, and I think mentorship, it goes to the heart of us as leaders and wanting to grow. Why not ask the guy who has been through it all and through this program? Chair Shaheen. Yeah. Ms. Hildreth. And through this program--like I--like I said, I know it is federally funded. It is going to launch. I think they are going to name all the entrepreneur or the leaders in February. That is going to be a great day for Iowans and others across the United States that are going to have these hubs to help them help our entrepreneurs. Chair Shaheen. Other thoughts? That is a great example. Mr. Snider. Mr. Snider. Yeah, Senator, if I may, I would say I think any great organization has grown through partnerships. So in Colorado, actually, we have a local chapter, so the Exit Planning Institute has about 30 chapters across the United States where business owners and business advisors come together to talk about exit planning and gain partnerships and gain further education around the topic. Governor Polis there actually funded a regional State of Owner Readiness Survey so that he could better understand the business owners within his State, and through that, the ESOP organization, through the government, has now worked with our organization to fund things like online education, something easy and simple that an owner can come online to and take owners forums, further research, and whatnot. So yes, the short answer is absolutely, and I think the agencies and the organizations locally should look to partner to bring that--to bring more awareness and education to business owners. Chair Shaheen. Great. Mr. Schoening, Ms. Croscut. Ms. Croscut. All right. I will jump in. I think the Main Street Ownership Act actually directed the SBA to help with the education around ESOPs, employee ownership in general. We have seen some of that, but it hasn't been as full, I guess I would say, as we would like it to be. So I would say, yes, there is more to be done. The act certainly was helpful in sort of providing the directive, but we would love to see more of that outreach and probably more education for those SBDCs. For example, you know, if they do not have the knowledge, they cannot share it, so. Chair Shaheen. So maybe this Committee should direct the SBA in doing more succession planning. Ms. Croscut. That would be fantastic. Chair Shaheen. Mr. Schoening, the last word. Mr. Schoening. So from our perspective, family-owned and operated businesses, a lot of them work with local colleges on career and technical education. For example, an electrical company may partner with a college that already has this equipment on hand, and they can train people in exactly how to use it, exactly how to repair it. So there may be some opportunity there to pair up with local colleges that specialize in estate planning and do some more education in terms of what they need to do, the will they need to have in place, the plan they need to have in place, and things like that. So yes, I do think that there is more of an opportunity for us to educate our members, especially family business owners and farmers, who, as we have heard here today, simply aren't prepared for succession. Chair Shaheen. Well, thank you. I agree. We have a--we have a great example at the University of New Hampshire, a center that helps with succession planning, but one of the challenges is helping people know it is there, and I think getting the word out, as you have all mentioned, is really important. So thank you all very much again for being here today and for your testimony. We look forward to staying in touch and hope that, Mr. Snider, you will share with us the results of your survey when you get it, and as all of you are working in your areas, that you will think about sharing with this Committee any ideas that you have. The record--the official record will remain open for 2 weeks for any additional questions and statements. [The information follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairwoman Shaheen. And with that, the Committee stands adjourned. Thank you again. [Whereupon, at 3:34 p.m., the Committee was adjourned.] [all]