#058
The Greatest Business Opportunity of our Generation
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We are in the middle of the biggest business opportunity America has ever seen.
The Silver Tsunami – a wave of Baby Boomer business owners reaching retirement age and looking for an exit plan.
As a potential business buyer, this generational shift presents a unique opportunity to acquire established businesses with significant market presence instead of trying to create something from scratch that often takes years of struggling before turning a profit.
In this article, we will delve into what the Silver Tsunami is, why it matters, and how you can navigate this opportunity to successfully purchase a business.
Understanding the Silver Tsunami
The term "Silver Tsunami" refers to the mass retirement of Baby Boomers, individuals born between 1946 and 1964.
For all the data-driven readers, here are the stats:
With roughly 10,000 Boomers turning 65 every day, we are witnessing an unprecedented shift in business ownership. According to recent estimates, 12 million Baby Boomers own privately held businesses in the United States, collectively valued at ~$10 trillion and generating an estimated $6.5 trillion in revenue annually.
This wave of retirements is expected to foster a significant transfer of business assets over the next decade.
The issue, however, is that as Boomers retire, many are facing unexpected challenges in succession planning. Their heirs are notoriously uninterested in taking over the family business, preferring instead for the one-time cash payout of a sale.
That’s because there is upwards of $100 trillion of collective net worth waiting to be passed on to successors and inheritors. This expected financial windfall is causing many Millennials and Gen Z individuals to be less inclined to assume the stress and responsibility of business ownership.
In short, there are a bunch of proverbial trust fund kids out there unwilling to put in the work leaving a prime opportunity for a veteran – conditioned to eating cold MREs on a freezing mountainside in Afghanistan – to land a profitable business in need of a leader.
I cannot understate the opportunity the Silver Tsunami presents for a hardworking individual who’s willing to take some risk to become break free of the rat race. The availability of established businesses with proven track records can provide a solid foundation for generational wealth and financial freedom.
How to Buy a Business Amidst the Silver Tsunami
Navigating the inventory of available businesses does require patience, careful planning, and strategic decision-making.
No worries, though. I’m going to give you the answers to the test.
Here’s a step-by-step guide to help you seize this opportunity.
0. Expectation Management
Yes, there is a Step 0.
It’s important to have your expectations in line before you ever make your first inquiry. Purchasing a business is not typically a quick process. Many deals take 1-2 years to find, fund, negotiate, and close.
Many business hunters will also look at north of 100 opportunities before the find the right one.
So, before you start, have your life and finances in order knowing that this will not be bringing income for some time.
1. Research and Preparation
Start by identifying the type of business that aligns with your interests and skills.
Or you can be industry agnostic and choose instead to be geographically restricted if you’re looking to remain in a location.
Research the industry, market trends, and potential challenges. At this phase, I highly encourage you to engage with a business broker, like Clearly Acquired, to gain insights and access to available listings.
This is where building your network is so important. Not all deals are going to be public knowledge – the best opportunities may come about through word of mouth referral.
2. Financing Options
Securing financing is a crucial step in the acquisition process.
But it doesn’t have to be as impossible as it might feel. Successfully funding a business acquisition is only limited by your imagination.
Explore various options such as traditional bank loans, Small Business Administration (SBA) loans, private investors, or Employee Stock Ownership Plans (ESOPs).
Also, ask if the owner is interested in owner financing or profit sharing. This is a fantastic way to spread out the capital burden while keeping them invested in the business’ long-term success.
3. Due Diligence
This is where getting reps in pays off.
The more comfortable you get with reading through a business’ financials and start seeing trends and patterns, the easier and less stressful this step becomes.
I’ll keep the content in this section short because I wrote an article dedicated solely to Due Diligence – it’s that important.
The gist, though, is you’ll be doing a thorough look behind the curtain to assess the business’ financial health, operational structure, and market position. Review financial statements, contracts, and any legal issues.
If you start seeing red flags, ask questions.
If their answers are vague, incomplete, or leave you feeling unsure, it’s a good sign to walk away and continue your search elsewhere.
4. Negotiation and Purchase
This is where you need to have your ABC Team:
- Accountant
- Banker
- Counsel
Trying to close the deal alone, especially as a first-time buyer, is a recipe for disaster.
Get your team on board and up to speed early in the process so they can be greasing the skids in their lanes. Having people who have acquired businesses before will help you get good terms, think creatively, and have everyone walk away from the table feeling warm and fuzzy.
Remember, the business owners have often invested significant portions of their lives into their companies. This is their baby. They want to see someone continue their legacy just as much as they want their pay day.
The Silver Tsunami represents a significant shift in the business landscape.
This will be an event people will look back on and regret not having been a part of it.
I’m so confident in this statement that starting this week I’m beginning my business search with Samson Jagoras and Clearly Acquired, and I’ll be documenting the entire process through this newsletter and LinkedIn posts.
The goal is to provide you real-time, inside knowledge into the struggles, tactics, and procedures. Like reality television for the acquisition entrepreneur.
Looking forward to sharing this journey with you all.
This week's Harder Not Smarter Podcast episode:
A former Navy SEAL and Montana Senate contender, Tim Sheehy shares gripping stories from his military service, revealing the intense challenges of combat and the struggle to find purpose post-service. Discover how his leadership in high-stress situations paved the way for his entrepreneurial journey with Bridger Aerospace, an aerial firefighting company with custom, purpose-built scooper planes. He also goes into his transition into politics, driven by a passion to bring new leadership to Washington and to advocate for veterans. This episode promises to inspire and challenge your perspective on leadership and service.
Click below to listen to the full episode!
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