The Silver Tsunami
- Blog The Silver Tsunami
Why now is the time to buy
If you’ve never heard of the Silver Tsunami, you might think it’s a car, a Mitsubishi, perhaps. Or a fancy shake from Sonic with extra whipped cream.
The term actually denotes the high number of baby boomers who are ready for retirement and are leaving the workforce. Silver describes their age. Tsunami, the sheer force of their departure from the working world, like a wave hitting the shore. Forbes notes that by 2030, there will be nearly 1 billion people worldwide that are 65 years of age or older, a demographic group that will swell to more than 1.5 billion by 2050.*
While this poses problems in certain areas of commerce such as healthcare or insurance, it can be a great opportunity for business owners. Many baby boomers who are current business owners are looking for a succession plan and are selling their companies. This equates to a large volume of opportunity for those looking to buy.
According to Kevin Calhoun, Founder of Document Mountain by Cornerstone, the occurrence of the Silver Tsunami is a time that should be capitalized on, especially if you already own a business. Acquiring the assets of these businesses can be a great way to build and grow your own small business.
Kevin’s story began while he was working for a tech company. He enjoyed the clients he was working with and the product he was selling. When he learned that his company was about to be acquired by a larger company, he and his wife decided that they would attempt to buy its assets instead. With the help of a business plan and a business partner, they were able to do so, though not without a couple bumps along the way and an eventual split with his business partner. He and his wife have continued acquiring assets ever since.
Kevin offers his experience and knowledge, showcasing how buying is a great way to grow your company. Here’s why:
Economies of Scale:
Ideally, according to Kevin, you would begin by acquiring companies that hit certain revenue numbers and are also in a similar field. If you’re in technology, look for technology. That way you can use those assets, whatever they might be, to increase your productivity while maintaining or lowering costs per unit. The larger your business becomes, the more likely this will happen. As you grow you can create more products while streamlining internal departments such as accounting, IT and HR. Externally, you can use customer bases to cross market, expanding your reach and to control larger pieces of the market, giving you competitive advantage.
Pools of talent:
One major benefit to acquisition comes in the form of good people who are already working hard to make the company run well. Not only does an acquisition sometimes ensure these jobs are not eliminated altogether, saving these jobs, but it also creates more opportunity for these people. Talented employees can then be given even larger roles, offering them the opportunity to grow and move into leadership as your company continues to grow. You can also use these people to help you run your own company, as mentioned above in economies of scale.
Mutual Benefits:
The baby boomer generation is ready to retire, but those who built their own companies from the ground up generally want to secure the future of what Kevin calls, “their babies.” Sometimes a founder will want to stay on with the company in a role that he or she enjoys. If you find a company with an owner who can identify what it is he or she loves about the job, you can then factor that into negotiations and include a job for the owner in which he or she can do what they want to do without having to do what they don’t want to do. For example, if they love sales but dislike accounting, you can offer the opportunity for the owner to run sales while handing off accounting. It’s a win-win. Kevin notes, however, given his experience, that if you leave the owner in a role within the company, it’s important to bring in a younger leader to shadow that owner. In that case, the younger leader will step into the role when the boomer is ready to hit golf balls instead of sales numbers. Then you won’t be left scrambling to make a good hire in a time crunch.
Thinking Bigger:
Acquiring assets grows your company in a way that expands your reach, thinking and vision. Instead of staying small scale in the space in which you already operate, buying businesses casts greater possibility, converging markets and ideas, and creating growth opportunities that are much bigger than you could have thought or imagined. Plus, it’s exciting and rewarding to navigate new terrain, strike deals, and pump new life into existing companies.
There is more technical information on how to go about doing this in the IOL podcast episode #165 with Kevin. In that episode, Kevin shares specific numbers to look for when searching for the right businesses, how to minimize liability, the realities of the timelines in acquisition, and the right perspective and mindset when starting out. Check it out!
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This post is based on the IOL Podcast #165: Buy vs. Build A Business with Kevin Calhoun.
*Wince-Smith, D. (2022, Feb 25). Bracing for the Silver Tsunami. Forbes. https://www.forbes.com/sites/deborahwince-smith/2022/02/25/bracing-for-the-silver-tsunami/
Author: Ashley Buenger
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