Unable to find a successor, Japan business owner plans to give company away

MONBETSU, Japan - Mr Hidekazu Yokoyama has spent three decades building a thriving logistics business on Japan’s snowy northern island of Hokkaido, an area that provides much of the country’s milk.

In 2022, he decided to give it all away.

It was a radical solution for a problem that has become increasingly common in Japan, the world’s greyest society. As the country’s birthrate has plummeted and its population has grown older, the average age of business owners has risen to around 62. Nearly 60 per cent of the country’s businesses report they have no plan for what comes next.

While Mr Yokoyama, 73, felt too old to carry on much longer, quitting was not an option: Too many farmers had come to depend on his company.

“I definitely couldn’t abandon the business,” he said. But his children were not interested in running it. Neither were his employees. And few potential owners wanted to move to the remote, frozen north.

So he placed a notice with a service that helps small-business owners in far-flung locales find someone to take over. The advertised sale price: zero yen.

Mr Yokoyama’s struggle symbolises one of the most potentially devastating economic impacts of Japan’s ageing society. It is inevitable that many small and medium-sized companies will go out of business as the population shrinks, but policymakers fear the country could be hit by a surge in closures as ageing owners retire en masse.

In an apocalyptic 2019 presentation, Japan’s trade ministry projected that by 2025, around 630,000 profitable businesses could close shop, costing the economy US$165 billion (S$221 billion) and as many as 6.5 million jobs.

Economic growth is already anaemic and the Japanese authorities have sprung into action in the hopes of averting a catastrophe.

Government offices have embarked on public relations campaigns to educate ageing owners about options for continuing their businesses beyond their retirement, and have set up service centres to help them find buyers. To sweeten the pot, the authorities have introduced large subsidies and tax breaks for new owners.

While the market has found buyers for the businesses most ripe for the picking, it can seem nearly impossible for many small but economically vital companies to find someone to take over.

In 2021, government help centres and the top five merger-and-acquisitions services found buyers for only 2,413 businesses, according to the trade ministry. Another 44,000 were abandoned. Over 55 per cent of those were still profitable when they closed.

Many of those businesses were in small towns and cities, where the succession problem is a potentially existential threat. The collapse of a business, whether a major local employer or a village’s only grocery store, can make it even harder for those places to survive the constant attrition of ageing populations and urban flight that is hollowing out the countryside.

After a government-run matching programme failed to find someone to take over for Mr Yokoyama, a bank suggested that he turn to Relay, a company based in Kyushu, Japan’s southernmost main island.

Relay has differentiated itself by appealing to potential buyers’ sense of community and purpose. Its listings, featuring beaming proprietors in front of sushi shops and pastoral fields, are engineered to appeal to harried urbanites dreaming of a different lifestyle.

The company’s task, in Mr Yokoyama’s case, was not easy. For most Japanese, the town where his business is situated – Monbetsu, which has around 20,000 people and is shrinking – might as well be the North Pole.

The only industries are fishing and farming, and they largely go into hibernation as the days grow short and snow piles up to roof eaves. In deep winter, some tourists come to eat salmon roe and scallops, and see the ice floes that lock in the city’s modest port.

A street full of 1980s-era cabarets and restaurants is a snapshot of a more prosperous time when young fishermen gathered to let off steam and spend big pay cheques. Today, faded posters peel off abandoned store fronts. The town’s biggest building is a new hospital.

In 2001, Monbetsu constructed a new elementary school building just around the corner from Mr Yokoyama’s company. It closed after just 10 years.

In times past, the classrooms would have been filled with the grandchildren of local dairy farmers. But their own children have now mostly moved to cities in search of higher-paying, less onerous work.

With no obvious successors, the farms have folded one after another. Decades-high inflation brought on by the pandemic and Russia’s war in Ukraine has pushed dozens of holdouts into early retirement.

As local farmers have aged and their profits thinned, more of them have come to depend on Mr Yokoyama for tasks such as harvesting hay and clearing snow. His days start at 4am and end at 7pm. He sleeps in a small room behind his office.

It would be “extremely difficult” if his business folded, said Mr Isao Ikeno, the manager of a nearby dairy cooperative that has turned heavily to automation as workers have become harder to find.

On the cooperative’s farm, 17 employees tend to 3,000 head of cattle, and Mr Yokoyama’s company fills in the gaps. No other area businesses can provide the services, Mr Ikeno said.

Mr Yokoyama began contemplating retirement about six years ago. But it was not clear what would happen to the business.

While he had taken on a little over US$500,000 in debt, years of generous economic stimulus policies have kept interest rates at rock bottom, easing the burden, and the company’s annual profit margin was around 30 per cent.

The ad he placed on Relay acknowledged that the job was hard but it said that no experience was needed. The best candidate would be “young and ready to work”.

Whoever was chosen would take over the debts, but also inherit all of the business’ equipment and nearly 60ha of prime farmland and forest. Mr Yokoyama’s children will get nothing.

“I told them that if you want to take it over, I’d leave it to you, but if you don’t want to do it, I’m giving it all to the next guy,” he said.

Around 30 inquiries poured in. Among those who expressed interest were a couple and a representative of a company that planned to expand. Mr Yokoyama settled on a dark horse: 26-year-old Kai Fujisawa.

A friend had shown Mr Fujisawa the ad on Relay and he immediately jumped in a car and showed up on Mr Yokoyama’s doorstep, impressing him with his youth and enthusiasm.

Still, the transition has not been smooth. Mr Yokoyama is not entirely convinced that Mr Fujisawa is the right person for the job. The learning curve is steeper than either of them had imagined and Mr Yokoyama’s grizzled, chain-smoking employees are sceptical that Mr Fujisawa will be able to live up to the boss’ reputation.

Also, most of the company’s 17 employees are in their 50s and 60s, and it is not clear where the new owner would find people to replace them as they retire. “There’s a lot of pressure,” Mr Fujisawa said. “When I came here, I was prepared to do this for the rest of my life.” NYTIMES