Is the Rise in Confidence in the Economy Misplaced?


A recent Grant Thornton CFO survey conducted in the fourth quarter of 2023 showed dramatic increases in finance leaders’ expectations of their ability to meet business goals related to their supply chain needs, labor needs, increased customer demand, cost control and growth projections.

The survey polled over 200 finance decision-makers from U.S.-based companies across the industry spectrum with at least $100 million in annual revenue.

Fifty-seven percent said they are confident they can meet their labor needs, up from 49% in the third quarter.

This was also an all-time high since the question’s inception in the fourth quarter of 2021.



The Grant Thornton survey is quite different from another recent survey by the National Federation of Independent Business (NFIB) which found that U.S small-business optimism suffered its biggest drop in more than a year.

The survey cited several reasons for the decline in optimism, including deteriorating profits and diminishing sales expectations. In fact, the most recent survey (January 2024) found that their confidence level registered the biggest monthly decline in over a year.

Given that the findings of these surveys are in stark contrast with each other, it’s important to understand why these two groups have such differing views of the economy and their prospects for success.



One of the most significant differences is the size of the companies participating in each survey. The Grant Thorton survey includes companies with at least $100 million in annual revenue.

The NFIB survey includes over 600,000 small independent businesses with an average revenue of $1.3 million.

There are significant differences between the two groups not only in the size of the company and financial strength but also in the level of quality and number of resources available to them in dealing with the problems they face.

In fact, smaller businesses face the same issues that larger businesses face, however they have far fewer resources available for help.

Given that the majority of US businesses are small businesses, over 90% according to the Small Business Association, their ability to be able to cope with their challenges is extremely important.



In fact, the top three critical areas they indicate worrying about are:

  1. a lack of confidence that the economy will improve;
  2. a lack of expectation for higher sales,
  3. and a diminished expectation for improved credit conditions.

While small businesses are admittedly at a significant disadvantage compared to larger businesses, there still are a number of tools and resources available to them to help overcome their challenges.

For example, technology has improved significantly and provides a platform for becoming more efficient and reducing expenses, as well as improving growth opportunities.




There are a wide range of cost-effective software services that are available for purchase or on a time-share basis, which can have a significant impact on the profitability of a business if used properly.

Using technology tools can enable small businesses to add new customers, re-engage customers that no longer purchase from the business and identify the most profitable customers to target.

There are also options available for small businesses to improve their financial resources and thereby have more financial capital available to invest in their business.

The Small Business Association (SBA) has a number of loan guarantee options available ranging from micro-loans of up to $50,000 as well as loans for equipment, business capital and real estate ranging from $500,000 to $5.5 million.

The SBA also provides a range of resources that can help business owners manage and grow their business.




In addition to the SBA, there are regional and community banks that have financial programs and specialists that are dedicated to helping small businesses find financing solutions.

They also have available treasury tools that can make it easier for small businesses to transact business.

It is also possible for business owners to use attorneys as a resource for legal and business advice to ensure they are avoiding any legal problems or potential lawsuits for unintended consequences of business activities.

There are a number of boutique law firms that are focused on helping small businesses. They typically have financial arrangements that are more affordable for small businesses and have contacts in areas outside of the legal field that can be helpful.

Many of these firms publish weekly newsletters and podcasts, which could be helpful in providing business knowledge to the owners of small businesses.




While owners of small businesses are concerned about the future, perhaps if they had more insight into the fairly extensive resources that are available to them to not only overcome their obstacles, but also to help grow their business, they might feel more optimistic.

So, is the rise in confidence in the economy misplaced?

Not for most businesses that are willing to look beyond their current situation and identify and capitalize on the resources that are available to them to plan and execute a profitable business plan.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Lessons Learned from Family-Owned Businesses


We have worked with a number of family-owned businesses over the past twenty years and have learned that they have many unique qualities.

A recent study completed by McKinsey and Company supports that finding and, in fact, has found that family-owned businesses outperform businesses that are not family-owned.

McKinsey analyzed 600 publicly listed family-owned businesses and compared their performance with 600 publicly listed companies that are not family-owned around the world.

They also surveyed an additional 600 primarily private family-owned businesses as well as interviewing leaders of family-owned businesses.



Family-owned businesses (FOB) have a significant impact on the global economy as well as on the United States economy.

In fact, the McKinsey study found that family businesses account for more than 50% of the global GDP and for nearly 60% of private employment in the United States.

This finding, taken in conjunction with the fact that family businesses were also found to outperform nonfamily businesses, demonstrates just how significant their impact is on the economy, both globally and in the United States.

It’s important for all businesses to understand what attributes set family businesses apart from other businesses, and what lessons they can learn from McKinsey’s research. 



McKinsey found that one important factor in FOB’s performance is their superior underlying operational performance.

This is an important attribute that drives improved bottom-line performance and is supported by several factors.

Those factors include four distinctive mindsets in the highest performing family businesses.

For example, the four mindsets include:

  1. a focus on purpose beyond the bottom line;
  2. greater reinvesting of capital (a sign of longer-term orientation)
  3. a conservative financial record (with lower average debt ratios)
  4. and centralized, efficient decision-making.



In addition, McKinsey found that outperforming FOBs also have several distinct imperatives:

1. They excel in operations and investing. In general, successful young FOBs do well because of efficient capital deployment. As they age and grow, operational efficiency becomes more important.

As a result, their operating margins are much better (17.7% vs. 9.4%). There are three major reasons for this record: a hands-on management approach, stronger performance management and greater investment.

2. They obsess over talent. FOBs believe they manage it well: 86% of outperformers said their company attracts the best talent, and more than 90% said they are good at developing it.

This doesn’t just happen. Leaders take clear action, such as benchmarking compensation against the competition and offering effective training programs to prepare the next generation.

3. They ensure strong governance. The most important factors driving this attribute are: 80% had written guidelines on the roles and responsibilities of family members; 90% had an independent board of directors (compared with 72% for the rest), and 95% involved non-family executives in strategy decisions.

Multigenerational FOBs tend to have a merit-based approach to managing the business.

They know that their long-term success requires focusing on the survival of the business, and if that means loosening the reins of family stewardship, so be it.



While the survey reveals a mindset and imperatives that contribute to their above average performance, family businesses, practically speaking, also face unique challenges that must be overcome.

We have helped many family businesses and have found that there are sometimes personal and emotional factors that some members of management bring into the business.

Bringing personal biases or family feuds into a business could, in our experience, negatively impact the effectiveness of the management team and result in poor operating performance.

We have also found that family members that have strong or overbearing personalities often shift the power dynamics and the related decision-making, from what is best for the company to what is best for the individuals that have the loudest voices.

Addressing these issues early on is important to mitigate the potential negative consequences.



Managing a family business with above average performance is no easy feat, and FOBs must constantly be striving to excel.

There are also other variables that could impact even the best performing FOBs that are somewhat out of their control.

For example, making a generational change in leadership may impact the governance of the business and adjustments may be necessary.

FOBs may also find themselves in an industry that is stagnant or vulnerable to competition and as a result strategic shifts may be necessary. In all cases, sound judgment and adaptability to circumstances are essential.

It’s important that all businesses learn lessons from the positive attributes of family businesses.

And they also can draw on the experience of outside advisors in helping them resolve these issues in a timelier manner.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Lawsuits are on the Rise for Small Businesses


A new study by the US Chamber of Commerce published in December 2023 found that small businesses are getting hit with a disproportionate share of lawsuits and they end up paying out billions in damages.

The study, based on statistics researched from 2021, found that the liability costs of lawsuits against businesses totaled about $347 billion, with small businesses accounting for about $160 billion of those costs.

Despite small businesses only representing about 20% of total revenue earned in 2021 of those surveyed, they were responsible for about 48% of the commercial lawsuit costs.

In fact, the smaller the business, the higher their share of liability as compared to revenue, with legal liabilities seven times greater for businesses with revenue under $1 million compared to businesses with revenue $50 million or more.

The survey has found that commercial tort costs for businesses with revenue of $1 million or less were more than $35 per $1,000 revenue earned. For companies with revenue over $50 million, they were less than $5 per $1,000 of revenue earned.



The most disturbing part of the survey revealed that businesses with revenues of less than $10 million were estimated to be self-insured for 61% of the cost of tort cases.

Even more concerning is that small businesses of less than $1 million were estimated to be self-insured for 74% of the cost of tort cases.

Smaller businesses tend to be self-insured and incur a significant amount of risk by not purchasing insurance or having low policy limits.

Small businesses often lack the economies of scale required to manage their liability risk and find that the cost of insurance is too great, or they fail to appreciate the level of risk they are assuming and choose to be either underinsured or uninsured.

Ultimately, the cost of risk is greater for small businesses, whether insured or uninsured.



“The U.S. lawsuit system is disproportionately stacked against small businesses that already have enough to worry about,” said Chamber of Commerce Institute for Legal Reform President Harold Kim in a news release.

“Every dollar that small businesses pay into the tort system is a dollar that doesn’t go to hiring, expanding or making new products.”

Overall, the risk of commercial lawsuits grew by about 19% between 2020 and 2021, higher than expected after accounting for inflation and economic growth.

One potential reason for high litigation costs for small-business owners could be a lack of insurance. Most small-business owners either lack insurance or are severely underinsured, according to a survey by Hiscox.

It was found that 75% of small businesses are underinsured. For small businesses operating for 10 years or more, 39% have never updated their general liability insurance.



So, the real question is how small business owners can avoid the cost of major lawsuits.

The first line of defense is to ensure the owner or CEO of a small business has a relationship with a law firm that specializes in helping the business proactively mitigate the risk of being involved in a lawsuit.

While attorneys can be expensive, law firms that specialize in working with small businesses sometimes have fee arrangements that make it more affordable.

They might have arrangements where they are on a maximum monthly fee and are available for consultation as needed to review contracts and consult on issues that could lead to lawsuits.

Given that every business is different, and risks vary depending on the industry a business is in, it’s important to have an attorney who has experience in your industry and to conduct a risk assessment of the areas that a business may be potentially vulnerable from a legal perspective.



Small business owners also need to ensure their corporate structure limits their liability. It’s important to consult your attorney and seek advice on the best corporate structure to limit your corporate and personal liability, in the event your business is faced with a lawsuit.

Your attorney can also provide you with feedback regarding the best way of obtaining the appropriate insurance to mitigate the cost of lawsuits, should they occur.

Having an insurance agency that has experience in your industry is also important to provide their thoughts on the appropriate type of insurance, policy limits and deductibles for your business.

They will also have a broader view of the insurance marketplace and will be able to find the most competitive rates.

While it’s hard to mitigate every risk that could lead to a lawsuit, having a proactive approach in understanding the risk your business has, along with having the right team of legal and insurance professionals, will go a long way in minimizing the risk of costly lawsuits your business may face.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

New Years Resolution: Don’t Be a Day Late and Many Dollars Short


As the calendar turns over to the new year 2024, most CEOs and boards of directors are thinking about a number of ways to improve their business.

The topics typically range from growing revenue, improving productivity, improving employee morale, or increasing bottom-line profitability, along with a host of other initiatives focused on improving enterprise value.

In many cases, the focus is on planning for growth.  However, the topic of planning for a potential crisis is often overlooked.



Establishing a plan to deal with a crisis, before it happens, is a critical part of management’s responsibility, just as much as it is their responsibility to plan for improvement.

A recent PricewaterhouseCoopers (PwC) global crisis survey reinforces this concept, as they found that 69% of the survey participants have experienced at least one crisis situation in the past five years. In addition, the Federal Emergency Management Agency (FEMA) estimated that 75% of businesses do not have a disaster plan in place. Furthermore, FEMA estimates that between 40-60 percent of small businesses close permanently after a disaster.

The consequence of not developing a plan to deal with a potential crisis, before it happens, could ultimately result in a significant decline in enterprise value and possibly lead to a company’s demise.



Companies should understand that they need to be prepared for a crisis, as it’s only a matter of time before one will likely occur. How they prepare for a crisis has a huge impact on the outcome and the financial impact on the company.

However, preparing for a crisis is easier said than done, as there are many types of potential crisis ranging from major disasters such as natural disasters, or those that are incurred in the normal course of business.

The PwC survey found that a range of crises come in all shapes and sizes. The most frequent crises that have occurred include operational breakdowns, competitive disruptions, supply chain issues, cybercrime or ethical misconduct.



While it’s difficult to anticipate and plan for every possible crisis scenario, it’s important to develop a framework for making rapid decisions based on the crisis at hand.

In addition, it’s important to identify the most likely one or two crisis scenarios that a company could potentially experience that would significantly impact their business.

For example, for any company involved in e-commerce, a cyberattack could have an immediate impact on the company’s ability to generate revenue and if it disrupts operations for an extended period of time, the impact could be fatal.

Supply chain disruptions could also have a significant impact on most companies that are dependent on receiving raw materials and/or shipping finished products to their customers. Identifying the most likely crisis scenario and developing a plan to minimize disruption can go a long way to mitigate the long-term impact.



One of the most critical elements of a proactive plan is to determine who is in charge when things go wrong. There needs to be a clear line of authority regarding who is making the decisions and at what level will the decisions be made.

Senior executives are most likely involved in every stage of the crisis response, however, there needs to be a clear definition of who is responsible for executing those decisions and their level of authority to make changes to the crisis plan along the way.

Management should also identify outside resources such as attorneys, accountants, insurance experts and advisors with operational experience in crisis management who could rapidly deploy to assist the company should such a crisis arise.

Attorneys can be extremely valuable to help proactively navigate the legal, financial and insurance issues that a company could incur during a crisis.



It’s important to have a law firm involved that has expertise in multiple disciplines, to ensure the company has the advice from legal specialists that understand risks in their respective areas of law.

In addition, it may be important to identify resources that could rapidly bring in additional manpower to help mitigate a disaster or other types of crises depending on what is needed to alleviate the impact on the company.

Furthermore, management should review the company’s insurance coverage to make sure they have adequate coverage for property damage, liability, cyberattacks, business interruption and loss of profit.

Having insurance in place to finance the operational recovery is critical in mitigating the negative impact.



While most companies don’t spend much time thinking about a potential crisis, it’s important to understand that a good offense is the best defense in mitigating the impact of a disaster. Many of today’s most damaging crises originate inside a company, and a core function of management and the board of directors is working with the management team to identify the most urgent emerging threats, think through potential risks and weaknesses in a company strategy, and put preventative, proactive measures in place before any lurking risks escalate into a full-blown crisis.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Why Banks Still Say No


In the intricate landscape of financial markets, the decline in loans to small and mid-sized businesses has become a pressing concern.

Traditionally, banks have played a pivotal role in fueling the growth of these enterprises, serving as a lifeline for entrepreneurs and contributing to economic development.

However, recent trends suggest a departure from this norm, with banks seemingly making fewer loans to small and mid-sized businesses.

There are multifaceted reasons behind this phenomenon and its implications for both businesses and the broader economy.



One of the primary drivers behind the decline in small and mid-sized business loans is the evolving regulatory environment. In the aftermath of the 2008 financial crisis, regulators worldwide implemented stringent measures to fortify the banking sector and prevent a recurrence of such catastrophic events.

While these regulations aimed to enhance financial stability, they inadvertently increased the compliance burden on banks.

The Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States, for instance, ushered in a new era of regulatory oversight.

The increased scrutiny and compliance requirements have made banks more risk-averse, prompting them to adopt conservative lending practices. Consequently, small and mid-sized businesses, which often lack the robust financial profiles of their larger counterparts, find it more challenging to secure loans.



Post-crisis regulations also introduced stricter capital adequacy requirements, compelling banks to maintain higher levels of capital to absorb potential losses.

While this measure enhances the resilience of financial institutions, it simultaneously restricts their ability to extend credit, particularly to businesses perceived as riskier.

Small and mid-sized enterprises, by virtue of their size and inherent volatility, are often classified as riskier borrowers.

As a result, banks may hesitate to allocate a significant portion of their capital to these businesses, preferring instead to focus on less risky ventures that promise higher returns.

The global economic landscape has witnessed significant turbulence in recent years.

Factors such as trade tensions, geopolitical instability, and the unprecedented challenges posed by the COVID-19 pandemic have created an environment of uncertainty.

In times of economic instability, banks tend to adopt a cautious approach to lending as they seek to mitigate potential risks to their portfolios.

The reluctance to extend credit to small and mid-sized businesses can be attributed to the perceived vulnerability of these enterprises during economic downturns.

Banks, in an effort to shield themselves from potential defaults, may tighten lending standards and reduce exposure to sectors deemed more susceptible to economic shocks.



Rapid technological advancements and changing consumer preferences have reshaped various industries, creating winners and losers.

Traditional sectors, which often comprise small and mid-sized businesses, may face challenges adapting to these changes.

Banks, cognizant of the evolving landscape, may be hesitant to lend to businesses in sectors perceived as declining or struggling to innovate.

This dynamic is particularly evident in the retail sector, where the rise of e-commerce has disrupted traditional brick-and-mortar businesses.

Banks may be wary of financing enterprises in industries undergoing such transformative changes, contributing to the decline in loans to small and mid-sized businesses.



Traditional banks, in their quest to adapt to the digital era, face challenges associated with legacy systems and complex infrastructures.

The process of digital transformation is resource-intensive and time-consuming, deterring some banks from fully embracing technological advancements.

As a result, these banks may struggle to provide the seamless, user-friendly lending experiences that small and mid-sized businesses seek.

FinTech competitors, unencumbered by legacy issues, can offer a more attractive value proposition, further diverting businesses away from traditional banking channels.



In an era of instant gratification, businesses expect speedy and convenient access to financial services.

Traditional lending processes, often characterized by lengthy approval times and extensive paperwork, no longer align with the expectations of modern entrepreneurs.

FinTech lenders, leveraging automation and data analytics, can offer faster and more streamlined lending experiences.

Businesses, particularly small and mid-sized enterprises with urgent capital needs, may gravitate towards these alternative lenders that provide quick and hassle-free access to funds.

Small and mid-sized businesses often require tailored financial solutions that accommodate their unique needs and challenges. Traditional banks, constrained by standardized lending models and risk assessment frameworks, may struggle to deliver the level of customization that businesses seek.



FinTech lenders, with their data-driven approaches, can analyze a broader set of variables to assess creditworthiness, enabling them to offer more personalized and flexible financing options.

This adaptability resonates with businesses looking for financial partners that understand and cater to their specific circumstances.

The decline in loans to small and mid-sized businesses translates to limited growth opportunities for these enterprises.

Access to capital is crucial for businesses to invest in expansion, innovation, and talent acquisition.

Without adequate financing, businesses may find it challenging to capitalize on growth prospects, potentially stagnating their development.

The decline in loans to small and mid-sized businesses is a multifaceted issue influenced by regulatory, economic, technological, and customer-driven factors.

As we navigate the complex web of challenges, it is essential for stakeholders – including regulators, banks, FinTech firms, and businesses themselves – to collaborate in seeking viable solutions.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

The Difference Between Receivership and Bankruptcy


Recently, Revitalization Partners was approached by a potential client who wanted assistance in closing down their business.

They, being more of an artist than a businessperson, had turned over the management of the business to individuals recommended by “friends” who had made very questionable decisions and had the owner take out a myriad of credit cards and two loans, all personally guaranteed.

While the LLC was very limited in assets versus its liabilities, the owner had just sold his residence, receiving a substantial amount of cash, so he was eager to avoid personal Bankruptcy.

After spending time explaining the differences between receivership and bankruptcy and the corporate and personal issues, we decided that he needed an attorney to sort out the various issues before we could be of help.




In the intricate web of financial jargon and legal intricacies, corporate and personal bankruptcy and receivership stand as crucial mechanisms for businesses and often owners facing financial distress.

Both processes offer relief to distressed companies, but they function differently, especially in the context of Washington State.

This article dissects the disparities between corporate bankruptcy and receivership in Washington State, providing insight into the implications for businesses navigating the treacherous waters of financial turmoil.



Corporate bankruptcy is a legal process wherein a business entity seeks protection from its creditors to restructure its debts and assets.

In Washington State, federal bankruptcy proceedings generally fall under two main chapters: Chapter 7 and Chapter 11.

Chapter 7 Bankruptcy –  involves the liquidation of a company’s assets to pay off creditors. A federal court-appointed trustee oversees the process, ensuring equitable distribution among creditors. Once the assets are sold, the business ceases operations, and the remaining debts are discharged, providing a fresh start for the company’s stakeholders.

Chapter 11 Bankruptcy – allows a business to continue its operations while formulating a plan to restructure its debts. The company develops a reorganization plan, subject to court approval, which outlines how it will repay creditors over time. This chapter is particularly common among large corporations seeking to restructure and emerge stronger. It is important to note that fewer than 20% of mid-sized and smaller corporations that enter into Chapter 11, actually succeed in completing the process. Subchapter 5 of Chapter 11 is a newer process designed for smaller companies with streamlined procedures that offer a greater opportunity for success at lower costs.



Receivership, on the other hand, is a state-court-based legal remedy where a neutral third party, known as a receiver, is appointed by the court to manage a financially distressed company.

Unlike bankruptcy, which operates under federal law, receivership in Washington State is primarily governed by state statutes.

A receiver can be appointed either by a court order, often through an Assignment for the Benefit of Creditors, or a contractual agreement among the parties involved.

The receiver takes control of the company’s assets, operations, and finances, with the primary objective of preserving the company’s value and maximizing the recovery for creditors.



Receivership serves various purposes, including asset preservation, business operations optimization, and debt repayment.

Unlike bankruptcy, receivership allows for a more tailored approach, as the receiver can focus on specific aspects of the business that require immediate attention, such as inventory management, cost reduction, or customer retention strategies. While some receiverships end in a liquidation or sale of the basic assets, due to the condition of the company in receivership.

In bankruptcy, the debtor typically retains control over the business under Chapter 11, subject to court oversight. In receivership, the receiver assumes control, making crucial decisions related to the company’s operations and assets.

This key difference often influences the choice between the two options, depending on the level of control the stakeholders are willing to relinquish and the financial capability to fund the proposed plan.



Active Involvement: Chapter 11 Bankruptcy proceedings involve active participation by creditors in the formulation and approval of the reorganization plan.

Limited Involvement: In a Receivership, the receiver acts as a neutral party, making decisions in the best interest of all parties involved. Creditors may have limited involvement in receivership, allowing for a more streamlined decision-making process.

Bankruptcy proceedings, especially Chapter 11, can be time-consuming and costly due to the extensive legal processes and requirements.

Receivership, being a state-court-driven process, can often be implemented more swiftly and at a lower cost, making it an attractive option for companies seeking a quicker resolution to their financial challenges.




In summary, while both corporate bankruptcy and receivership offer avenues for financially distressed businesses to navigate their crises, the choice between the two depends on various factors, including the level of control desired, creditor involvement, and the urgency of the situation.

Understanding the nuances of corporate bankruptcy and receivership in Washington State empowers businesses and stakeholders to make informed decisions, ultimately paving the way for a smoother transition towards financial stability and future success.

Given the economic climate today; where banks are approving fewer loans and funds from the federal government are more difficult to obtain, if you begin to see the handwriting on the wall, don’t hesitate to ask for help.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership, or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Rapidly Rising Rents are Threatening Independent Businesses


In cities as diverse as Portland, Seattle, Spokane, and even Austin, TX., retail rents and those for manufacturing and warehouse space have increased by double-digit percentages over the last year alone.

As the cost of space rises, neighborhoods that have long provided the kind of varied environment in which entrepreneurs thrive are becoming increasingly inhospitable to them.

Independent businesses that serve the everyday needs of their communities are being forced out and replaced by national chains that can negotiate better rents or can afford to subsidize a high-visibility location.



The cost of commercial space is spiking upward around the country, driven both by run-away real estate speculation and the growing popularity of urbanism.  As a new generation discovers the appeal of walkable and mixed-use neighborhoods, demand for small commercial spaces in those neighborhoods is far outpacing supply, and rents are rising to match.

Locally owned enterprises, which thrive in these areas, are increasingly threatened with displacement from the neighborhoods that they’ve made vibrant, and getting replaced by national chains that can negotiate better rents or afford to subsidize a high-visibility location.

As high rents shutter longtime businesses, they also create an ever-higher barrier to entry for new entrepreneurs, stunting opportunity and leading to a scarcity of start-ups in cities once known for their business dynamism.

In one Seattle neighborhood, near the residence of a Revitalization Partners Principal, a number of restaurants and a gym, often frequented by his family, are closing due to rent increases which are proving to be non-negotiable with landlords.



When once-thriving blocks become taken over by generic national brands, local business owners lose.  But so do cities and the people who live in them.

The businesses on the front lines of rising rents are the grocers and hardware stores, the neighborhood-serving businesses selling everyday goods with little padding on their margins.

When these businesses get displaced, residents lose the ability to walk to the store for their shopping, to bump into neighbors, and to chat with the business owners, who often attend to a variety of community needs that go well beyond making sales.

“We’ve been priced out of a ZIP code that we’ve been in for the past 18 years,” wrote a local retailer in Austin in the comments of a survey of independent businesses. “I don’t mean rents slowly creeping up; I mean we would be paying more than double.”

This business owner isn’t an outlier. In a survey, 59 percent of retailers reported being worried about the increasing cost of rent, and one in four described it as a top challenge.



Behind these rising rents are a complex constellation of causes that span new urbanism and global capital. On the demand side, cities are booming, and there’s an increased demand for the small-scale, walkable storefronts in which independent businesses thrive.

National chains, too, are entering the hunt for space in cities, drawn by rising populations and having saturated the suburbs, seeking new markets.

On the supply side, as older buildings—which were generally designed to have small-scale, ground-level retail space—are getting razed for new development, those new projects often don’t replace them, instead containing commercial space that’s larger-format and designed for a national chain.

For the real estate developers behind these projects, securing a single large ground-floor tenant makes a project easier. A name-brand tenant is a faster ticket to financing for a project, especially within a banking system that’s increasingly national and international in scope.

“The way that projects are financed, they go to a safe way of doing development and they have large tenant spaces that make the banks happy that are lending to them,” says Ken Takahashi, in the Seattle Office of Economic Development.

This bias toward large spaces in new construction further skews the built environment in favor of bigger companies and compounds the issue of rising rents.

“In a lot of places, the spaces are not the right size for smaller businesses that really only need a fraction of what’s available, and they can’t afford to pay rent on a much larger space,” Takahashi says.



Another challenge is that real estate developers and the brokers they hire are often themselves national in scale. They lack knowledge of the local businesses in the market, but already have ongoing relationships with many national brands.

Similar incentives, driven by how buildings are financed, also lead property owners to favor chains. While there is a perception that national chains pay higher rents, that’s not necessarily true.

In some cases, it’s local businesses that have to pay higher rents in order to prove themselves, while national chains are given a discount for their perceived stability and creditworthiness.

“A formula retail tenant may not be paying more per square foot, but it adds some creditworthiness to the balance sheet for the landlord, and it makes your bank happy,” says Rodney Fong, president of Fong Real Estate Company in San Francisco and a member of the San Francisco Planning Commission.

Banks and other lenders often provide lower interest rates or better terms if a building owner has signed a national brand. When property owners and investors can get better terms by leasing to a business like a Target, Fong explains, “Target will win every day.”



Structural incentives and geographic biases like these are further distorting the commercial real estate market for locally owned businesses, making it difficult for them to compete on their own merits.

At the same time, property values are soaring, for reasons that include financial speculation and, in the present climate, real estate is becoming an increasingly popular place for global investors to park their capital.

Combined, these factors are creating rent increases that local businesses can’t absorb. Many of them are forced through the expense and challenge of relocating their business or closing altogether.

In one survey of businesses along Magazine Street in New Orleans, 76 percent of local business owners reported fearing that soaring rents would force them off of the street.

A report from the city of Boston found that among the city’s primary gaps in its small business ecosystem, “Some gaps, such as a lack of available, affordable real estate, are pervasive and affect most small businesses in the city.”

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.