As we are all painfully aware, none of us are getting any younger. This is especially true of aging baby boomers. The reality is throughout the next 10 years, baby boomers are expected to retire in droves. As they retire, they will be taking with them decades of institutional knowledge that will be difficult to replace.
This trend is most likely going to impact smaller privately held companies even harder given that many are also owned and lead by baby boomers and typically have much smaller work forces from which to groom knowledgeable replacements for retiring experienced workers.
Recently MiddleMarketGrowth.com published an enlightening piece that examines this movement in great detail. This is how they described the current employment trend:
Despite the doom and gloom of recent economic news, the middle market continues to outpace large-cap companies and global corporations in business growth, M&A and workforce expansion.
Most middle-market business leaders are well aware of the “war for talent” that exists today. Attracting and developing talent has been and will continue to be the No. 1 constraint on growth for midsize companies. The bad news is that this war is expected to intensify over the next five to 10 years due to significant changes in the workforce. On the bright side, however, small and midsize companies have an opportunity to compete—and win—against large corporations.
The “significant changes in the workforce” mentioned above revolve around two interrelated issues. One, I have already mentioned: the ongoing retirement of talented baby boomers. A corollary issue impacting this trend is that the next age cadre that should replace this group are GenXers. Unfortunately, this group is much smaller than the baby boomer generation, which means that millennials will be taking up the slack.
The good news, according to MiddleMarketGrowth.com, is that millennials make up “the largest generational U.S. workforce in history. Born between the early 1980s and the early 2000s, this group has already surpassed the two older generations in workforce size. According to the Pew Research Center, millennials accounted for more than 53.5 million employees in 2015.”
The bad news? Well, they are millennials. OK, so much has been made over the years about this younger generation and its ills. The reality is every generation has been characterized by its elders as having its own set of negative issues.
The fact is: You most likely will need to recruit a set of millennials to replace your key aging baby boomers eventually. Rather than bemoan that fact, the good folks at MiddleMarketGrowth.com (the brilliant article was actually penned by Dan Hawkins, a seasoned business executive and former chief human resources officer and founder of Summit Leadership Partners) provided great advice for how to, instead of fighting this trend, actually position your company to find the best and brightest replacements possible.
Hawkins offers these practical suggestions for business leaders to accomplish this:
Back in early 2014 we published a piece that examined the need for business owners to expand their marketing focus beyond just the traditional one, which for decades has been on baby boomers. From a business development standpoint, the reality is as maligned as they are, millennials are going to drive our economy starting in the early 2020s and for the next thirty years. Companies need to adjust their marketing and sales for this new reality to survive.
The same is true for the hiring, mentoring, and retaining of millennials as employees. The bullet points above have some GREAT ideas that I have taken the liberty to highlight. I am looking at this issue of baby boomer retirement/millennial hiring from a buyer’s perspective. If you are a buyer, one of the most important due diligence items you examine is a target’s employee base, talent pool, and HR policies. If you as a buyer encounter a company comprised of aging baby boomers in all key positions with no bullpen of talent developed, you are going to be very concerned.
The great news is that with a new focus on what drives these younger folks, what truly motivates them, you can create a “buyer ready” business that can thrive even as you face the retirement of your key, long-term folks (and even yourself).
One of the most important issues to understand is that unlike baby boomers, millennial employees care more about seeing how their work fits into a bigger picture, a higher calling if you will. Therefore you need to create positions that help them see that.
But even more importantly, as Mr. Hawkins so clearly points out, you have to tap into the institutional knowledge of your baby boomers long before they retire, and if possible, create mentoring programs so that they can transfer their years of experience prior to retiring (or worse yet, exiting this mortal plane in an untimely fashion).
Now for the Hard Part
This could be a huge challenge as you are faced with helping Bob, who has worked in your shop for 40 years, transfer all that unwritten experience to someone in his/her 30s with tattoos and piercings. I only am half-jesting here. The point is if you own a privately held company and you have key baby boomers heading to retirement in the next few years, you need to be very proactive and get ahead of this curve.
If you don’t, it may impact your ability to find a buyer for your business. Or at least close an optimal deal. I recall meeting with a client a few years ago when we were valuing his company. We were discussing factors driving his success and he said to me, “You want to meet why this company is successful?” He took me to his shop floor an introduced me to his key employee, a grizzled veteran of ages, who had started working the CNC machines in his shop while still in high school. The owner was justifiably proud that this fellow had been with the company, doing the same job for nearly five decades. Unfortunately, I had to help him see the situation as a buyer would. With no backup trained, no mentoring in place, and no production manuals in existence, this situation would be seen as a potential risk.
Bottom line: As much as you may not like the idea, your key folks will be retiring. Even more anathema to you is the idea that a millennial may be the person you need to hire and develop. As soon as you get over this and plan for the future, the better off your company will look to buyers coming in to view it.
Or course this is just one issue you will face when you enter the market looking for buyers for your business. The good news is that Generational Equity, a middle-market M&A consulting firm, has helped hundreds of clients navigate these waters and successfully find buyers for their businesses.
No matter what you do, even if you are not planning to sell for 10 years, begin to groom replacements for your aging baby boomers. For many of you, your businesses continuity will depend on it.
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.Rick Greene of Dobbs Equity Partners LLC
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.Betty L. Brennan, President, Taylor Studios
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward.Tom Currier, Former President & CEO, Rackmount Solutions
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The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.Salvo Stoch, Founder and CEO of Sleeping Partners
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.JoAnn Ellis, Owner of Fondren 5 Star Kennels
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!JoAnn Ellis, Owner of Fondren 5 Star Kennels
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.Shane and Johanna Kline, Owners of Vision Upfitters
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.Caroline Connelly, CEO, OptoTest
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
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