Most successful businesses have policies in place to address potential inclement weather. A business may encourage telecommuting in the event of a winter storm, or it might conduct emergency drills to prepare for the severe weather so common to this state.
Chances are, though, most businesses have not yet prepared for another pending storm, one with the potential to upend our economy and leave consequences for years to come.
That storm is called the “silver tsunami,” and it represents the wave of baby boomers who are retiring. On average, 10,000 baby boomers retire every day. Among them are 12.3 million business owners, the majority of whom will leave the workforce in the next decade, many without preparation or strategies for the success of the business they leave behind.
Over the next five to 10 years, the silver tsunami will result in the largest transfer of wealth and business ownership in U.S. history. While this dramatic change will create some positive opportunity for subsequent generations, it could also lead to catastrophe if baby boomer business owners fail to plan for this transition.
Published statistics show the transfer of business ownership to a second-generation family member fails about 70% of the time. A merger or acquisition has about a 50% failure rate. Using the 70% failure rate to consider the implications on just one sector of the economy, manufacturing, then Arkansas has the potential to lose 60,000 manufacturing jobs and $2 billion in tax revenue over the next five years. In our modern, interconnected economy, the silver tsunami’s impact on manufacturing alone would have ripple effects on Arkansas’ entire economic infrastructure.
So, absent a silver tsunami warning system to keep our government and business leaders on notice, how can we avoid a pending disaster?
Continue courting out-of-state businesses. Relocating companies infuse new energy into the state’s economy, and they often bring with them higher wages and a quick uptick in employment.
Foster innovation and entrepreneurship. Though startups require an extensive investment of capital and time before they begin to generate revenue, they pay off with high-quality, high-paying jobs. Arkansas has a long history of successful startups that have grown to become forces within their industries.
Provide support to existing businesses, which are the bedrock of our employment and tax base. Some of these existing businesses may just need additional investment in order to survive the tsunami. The Arkansas Economic Development Commission and Arkansas Capital have some resources available for existing business owners, but perhaps it is time to consider additional support and assistance for existing businesses in the process of transition.
Of course, those responsible for the silver tsunami can take precautionary steps as well.
Plan ahead. Be intentional about the changes that are about to happen, and do not wait until the last minute to inform others about retirement decision. Successful retiring business owners have said they started planning for their transition about three years before retirement.
Cross-train a successor. When cross-training a successor, owners have the chance to share his or her vision for the company and provides the planned successor with a chance to perform the role prior to a change. In this type of scenario, the retiring owner can see first-hand how the successor manages and allows time for other choices to be made, if needed.
Invoke the “8-Hour Rule.” The most successful transitions happen when visionary CEOs take their hands off the wheel and make themselves non-critical.
Pre-test the company’s ability to survive. Ask the tough questions about succession plans and the post-transition environment. Determine whether any key employees will leave, too, or whether the culture will change for the worse or better.
We all have roles to play, and challenges to meet, ahead of the pending silver tsunami, but with the proper planning, our economy can weather the storm.
Editor’s note: Alese Stroud is CEO of Corporate Insight Strategy in Little Rock. The opinions expressed are those of the author.